The FCC Jump Starts Special Access (Again) and AT&T’s Disingenuous Response.

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Good news, the FCC has decides to one again reboot its seven year old proceeding on “special access.” Given that I have been flogging the FCC since 2006 to do something about this, with occasional reminders since then, I am obviously pleased. For those new to this, “special access” is the rate businesses and competitors to telcos pay to telcos for wholesale access to their telecommunications capacity. When you place a call over your Sprint or Cricket cell phone, the call goes to the tower. What generally moves it from the cell tower to the Internet “cloud” or the public switched telephone network is a special access line. If a business wants to buy a high capacity line, it does so under special access. You can watch my video explanation of what special access means and why you should care here.

AT&T, one of the chief beneficiaries of the current deregulated regime because they face little to no competition in its service territory, is less pleased. Mind you, AT&T is not alone in this. For reasons you can find in the longer, wonkier version of this post on my other blog, telcos generally have monopolies on special access circuits in their service territories, and the three largest telcos -- AT&T, Verizon, and CenturyLink -- therefore control most of the market. But in its service territory, each telco maintains a near-monopoly on special access. 

Monday, Chairman Genachowski told reporters he had circulated and order that would (a) freeze current special access prices, preventing AT&T from implemnting yet-another rate hike on some special access services; and, (b) use its authority over the telcos to compel AT&T and the other special access providers to provide data that will prove whether or not the telcos are able to charge monopoly-level prices in their service territories, or not. In its blog post criticizing this move, AT&T’s chief argument against the FCC denying it yet another rate hike and demanding AT&T and the other telcos fork over data critical to determining if they are charging monopoly rents is: “Why you bringing up old stuff?”

This is not exactly the pinnacle of legal reasoning or persuasive policy. But in AT&T’s defense, when it’s all you got you make the best of it. Bob Quinn does a masterful job of focusing entirely on the price freeze and ignoring the broader context of a 7-year old investigation into whether the special access market has adequate competition. If you never heard of special access until Monday, and then read AT&T's blog post, you would come away thinking this is about legacy copper phone bits that don’t matter anymore and that somehow the FCC taking action here is distracting us all collectively from building the super cool uber fast Gigabit networks we need and would build if only the FCC had let AT&T buy T-Mobile. (Sorry, wrong talking point!)

Lets begin with the fact that the FCC actually has a requirement under the law to make sure that all rates for telecommunications services, like special access, are sold at "just an reasonable rates." Last I checked, the FCC's responsibility to uphold the law applies whether it involves gigabit networks, ndividual consumers like you and me, or anything in between. But even if we accept the premise that the FCC shouldn't trouble itself for just any old violation of the Communications Act, or care about a relatively minor exercise of ani-competitive market power, AT&T's response is somewhat disingenuous.  

AT&T's blog post accurately explains the specific service covered by AT&T's latest price increase, but this isn’t about some musty old copper no one gives a damn about. PReventing AT&T's latest price hike is merely incidental to getting serious about special access reform. The special access proceeding, including the proposed freeze on AT&T's rate hike, deals with infrastructure critical to broadband and wireless communication and which generates between $18-20 billion annually. With estimates that a huge chunk of that revenue comes from the ability of telcos to charge monopoly rates, special access reform is a very big deal.

For consumers, what happens when the cost of these special access circuits goes up is similar to what happens when the price of a barrel of crude oil goes up. No one buys crude oil by the barrel. But because we as a society are dependent on crude oil, an increase in the price of a barrel of crude raises the price of everything from the electricity that runs my air conditioning to the gas in my car to the goods I buy at the store. Similarly, if special access prices go up, the cost to my cell phone provider and the cost to enterprise customers that use these services go up — which ultimately impacts what they charge me.

So why does anyone care about this silly Title II telecom stuff anymore? Why bring up old stuff? Let me summarize with a simple, straightforward answer.

BECAUSE YOU ARE MAKING BILLIONS IN MONOPOLY PROFITS AND DRIVING UP THE COST OF CELLULAR SERVICE FOR CONSUMERS, AND IT VIOLATES SECTION 201 OF THE COMMUNICATIONS ACT. 

That’s why.

Stay tuned . . . .

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