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FCC Suspends Special Access Deregulation

In a 3-2 party line vote, the
FCC has suspended its current benchmarks
for deregulating the rates of
special access (business) broadband services while it better determines where
there is competition for that service.

The "better determining" part will be via a
mandatory data collection from providers, which the FCC promised it would
launch within 60 days. The FCC has tried voluntary data collections, but some
players were no-shows.

The item was voted Aug. 15, but not released until Aug. 22.

"Based on the record and the undisputed finding that
legacy regulations are not working as intended, we temporarily suspend outdated
rules that not only allow incumbent carriers to raise prices in the absence of
competition," said FCC chairman Julius Genachowski, "but also deny
them the flexibility to lower prices in the presence of competition. We do this
as we determine what permanent rules would best promote a healthy competitive

The FCC vote means actions on petitions for deregulation
under the current benchmarks have also been suspended. The commission said the
suspension was temporary, but one commissioner pointed out that a previous
"temporary" move by the FCC stretched to over three years. "By
all appearances, the majority is wrapping its decision in the protective cloak
of ‘interim' status merely to increase its odds of success during the
inevitable appeal," said senior Republican Commissioner McDowell in his

Under FCC rules, telcos are required to lease special access
lines to competitors. But the FCC deregulated AT&T and others' special
access lines in 2009 in cases where competitive triggers are met.

Those lines are the "last mile" dedicated
broadband lines to businesses, which incumbent local exchange carriers like
AT&T dominate. By contrast, residential customers can generally choose from
cable or phone lines for their service.

The commission over a dozen years ago removed "dominant
pricing" regulations, while continuing to regulate interconnection and
reasonable pricing per its Title II common carrier regulation of Independent
Local Exchange Carrier (ILECs). Ever since, the commission has been under
pressure from publicinterest groups to re-regulate special access.

The two dissenting Republicans were in agreement that the
commission was taking a ready, fire, aim approach by suspending the
deregulatory triggers before it had the data in hand on market competitiveness.

"Today, the majority has opted to suspend a
thirteen-year-old special access regulatory framework without an adequate
evidentiary record or market analysis, both of which are necessary to make such
a sweeping rule change," said McDowell. "In doing so, the majority
chose to lay its procedural path backwards. Due to such glaring deficiencies, I
have no choice but to respectfully cast a dissenting vote."

McDowell has long called for a comprehensive study of the
marketplace before the FCC acted, if it needed to act.

In his dissent from the decision, Republican Commissioner
Ajit Pai called it a case of "Sentence first -- verdict afterward,"
borrowing from the Queen of Hearts in Alice
and Wonderland
. The sentence, in this case, is suspending the current
triggers under which telcos can seek relief, then conducting the mandatory data
collection -- which Pai supports -- to determine the competitiveness of the

"The commission has reversed the steps that a
data-driven agency should take," he said. "As a result, today's
action appears consistent with the Administrative Procedures Act [which
prescribes the rules for agency decision-making] only when viewed through the
proverbial looking glass."

Pai adds that the decision is more troubling for the signal
it sends of dismantling a bipartisan deregulatory framework launched under
President Clinton and preserved under President Bush, only so that the FCC can
"travel down the rabbit hole of re-regulation," with a stop along the
way to re-regulate fiber.

The Republican chairs of the House Energy & Commerce Committee and its Communications Subcommittee were not pleased with the commission decision.

"The FCC has once again handed down a decision without providing sufficient evidence that action is needed," they said in a joint statement. "The decision violates good process and is difficult to square with Chairman Genachowski's previous statements about how this issue would be addressed....The FCC has a responsibility as an expert agency to justify its actions with data before intervening in the status quo. Chairman Genachowski has said that the House-approved FCC Process Reform Act is unwarranted. Actions such as these provide further evidence to the contrary."

The FCC had plenty fans, as well.

"The FCC's action to suspend its pricing flexibility
triggers is an appropriate and very responsible decision," commented Rep.
Mike Doyle (D-Pa.). "There is widespread agreement that the triggers don't
adequately measure effective competition, and the agency certainly should not
base any of its rules on inadequate measurement tools. This decision is an important
step toward correcting the FCC's broken special access regime, and I applaud
Chairman Genachowski's determination to make it happen

"Suspending operation of the flawed pricing flexibility
triggers for special access services is an important acknowledgement by the FCC
that the current special access regulations are broken," said the
Broadband Coalition. "We plan to work with the Commission as they tackle
comprehensive special access reform which will benefit businesses across
America that depend on us for affordable, innovative and high quality broadband

"Today, the Federal Communication Commission suspended the
use of flawed rules that have contributed to the unreasonably high rates for
critical special access services," said Sprint Nextel senior VP Vonya
McCann. "We applaud the Commission for addressing this aspect of the
failed special access market, an important step at a time when the American
economy needs it most."