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FCC to Probe Special Access Rates, Deny AT&T Petition

The FCC has voted 5-0 to deny an AT&T petition seeking to halt deregulation of the Bells’ provision of special access services, we've learned. However, in a partial victory for AT&T and its allies the FCC will issue a further notice of proposed rulemaking posing several questions about the future of special access charges. The FCC was making last-min. tweaks to the item prior to the release of text, which could come as early as today (Fri.), we're told.

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The development is especially significant in that it comes on the day news leaked that SBC is in talks to buy AT&T (see separate story in this issue). Sources noted that SBC is most interested in AT&T’s enterprise long distance customers, who are served through special access. In Oct. 2002, AT&T asked the FCC to set a moratorium on further special access deregulation and roll back rates charged by the Bells.

“It’s important to the company because these are really high rates,” an AT&T source said. A source who has promoted special access reform said he was still waiting for the text, but the further notice would appear to be a positive development. The Bells have strongly opposed changing the rules giving them greater pricing flexibility.

The further notice will ask a battery of questions about the appropriate regulatory treatment for special access, officials said. It’s expected to inquire whether the FCC should repeal pricing flexibility changes in some manner and whether there’s interim relief that the FCC can provide. The notice will also ask questions about the proper triggers for that relief and whether rate of return is the best way to determine rates for special access.

Under the current regime all of the major ILECs have to offer 2 different pricing schemes for special access. In rural areas they still must offer capped rates. But in areas with competition they are allowed pricing flexibility.

“For the rates that have been granted pricing flexibility because of the alleged competition, what has happened?” asked a supporter of reform. “Those rates are being tracked by NASA, they're so high. Rural rates have been going down.” The Special Access Reform Coalition (SPARC), which includes AT&T, eTUG, representing major customers, other CLECs and wireless carriers, was formed to promote reform.

The Bells have argued that rates are competitive and the FCC doesn’t need to reverse course on rate flexibility or issue a rulemaking. BellSouth said in its most-recent filing on the topic DS1 prices have fallen for its customers 12.3% over the last 3 years on a nominal basis and 13.96% on a real basis. BellSouth also saw other signs of competition: “As of 2003, CLEC networks consist of 324,000 route miles, an increase of 84% from 2001,” the carrier said. A spokesman for BellSouth said Thurs. the company is satisfied that any new look at special access will show that competition has worked to drive down prices.

SBC said in a filing its DS1 rates have dropped 14% over the past few years. “One of the success stories for the FCC in recent years has been its pro-competitive deregulation of special access prices,” Verizon said. “AT&T would now like the Commission to reverse that policy and turn back the clock.”