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AT & T granted limited relief on business broadband regulation

Fri, 10/12/2007 - 7:58am
Seth Wallis-Jones, World Markets Research Centre

Copyright 2007 World Markets Research Limited

AT&T has been granted forbearance from a limited set of regulatory requirements for its business broadband services, allowing it greater flexibility in setting prices for business broadband services.

AT&T has been granted forbearance on rules governing the setting of tariffs for a wide range of broadband and optical networking services that target businesses. The giant had sought relief from Title II of the Communications Act and the Computer Inquiry rules on these services.

Forbearance has been allowed on a number of regulatory requirements that make pricing and service flexibility more difficult for those dominant incumbent operators deemed to have "individual market power" - analogous to the concept of "Significant Market Power" used by European Union (EU) regulators. Democrat Commissioners Michael Copps and Jonathan Adelstein voted against the motion while Republican Robert McDowell, who was widely seen as a possible opponent, voted for the motion for limited forbearance to pass it 3-2.

There are several requirements on dominant Incumbent Local Exchange Carriers (ILECs) or Bell Operating Companies (BOCs), to which Competitive Local Exchange Carriers (CLECs) are not subject. These include the requirement to file tariffs as a dominant carrier with seven or 15 days' notice with supporting data, in contrast with the non-dominant carriers, which are both not subject to rate regulation and are able to file with one day's notice (when services are not subject to cost support).

Discontinuance, reduction or impairment of a service is also more tightly regulated for dominant carriers, requiring a 60-day waiting period, compared with a 31-day waiting period for non-dominant carriers. The domestic transfer of control requirements is also more stringent for dominant carriers, although AT&T will now not have to meet these requirements.

The Computer Inquiry rules have also evolved from relating to the provision of 'enhanced services'. These have moved from requirements for structural separation - as are currently being considered by the EU - to allowing non-structural safeguards such as Comparably Efficient Interconnection (CEI) or Open Network Architecture (ONA), which ensures an unbundled network architecture is available to competitors.

AT&T is now forborne from the Computer Inquiry rules relating to the bundling of services and structural separation of ONA and CEI, although non-discriminatory access is still required for the provision of enhanced services:

The tariffing and pricing regulation of Frame Relay Services, ATM Services, LAN Services, Ethernet-Based Services, Video Transmission Services, Optical Network Services, and Wave-Based Services are all forborne, while traditional TDM-based DS1 (T1) DS3 (T3) and all services below 200 Kbps in each direction are excluded from deregulation. DS1 and DS3 services are part of the ongoing enquiry into the special access market. The order states that:

"AT&T will remain subject to other regulations governing its actions as a dominant carrier including interconnection, non discriminatory access to network elements, directory assistance, databases and signalling, as well as the standard universal support, disability access, privacy and emergency service provision."

This adds to the forbearance granted to AT&T under the Section 272 Sunset order of 12 September, which granted similar relief to interstate inter-exchange services and is part of a generally de-regulatory approach being adopted by the Federal Communication Commission (FCC). Verizon had previously acquired forbearance in a similar petition making this development for AT&T widely expected.

The FCC's stance is largely guided by the principle that regulation prevents flexibility and limits the incumbent operators' ability to respond to changing market conditions - meaning that the best price for a service is not available to customers and that competitors gain an unfair advantage in offering competing services during waiting periods.

Essentially, the beliefs of the FCC, as outlined in this order, are that there is now sufficient competition. Time Warner Telecom was one specific objector to the forbearance application, although it was noted in the order that contrary to its assertions in the objection, it publicises its ability to effectively able to provide service using its own facilities or unbundled TDM loops covered by special-access regulation. The order states that:

"The Commission has recognized that tariffs originally were required to protect consumers from unjust, unreasonable, and discriminatory rates in a virtually monopolistic market, and that they become unnecessary in a marketplace where the provider faces significant competitive pressure... The better policy for consumers is to allow AT&T to respond to technological and market developments without the Commission reviewing in advance the rates, and terms, and conditions under which AT&T offers these services."

This is one of a number of regulatory developments that have been favourable to the incumbent telcos - from the relatively light requirements for the combination of AT&T and BellSouth, through to the orders allowing the combination of local and long-distance units, to three decisions on business broadband and franchising for TV services.

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