FCC suspends flexible pricing on coveted broadband lines

WASHINGTON Thu Aug 23, 2012 5:10pm EDT

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WASHINGTON (Reuters) - Regulators have temporarily suspended pricing flexibility rules for high-capacity broadband lines, raising hopes for companies that say Verizon Communications Inc and AT&T Inc have overcharged them billions of dollars for access to the lines in recent years.

High-capacity, "special access" lines securely send large quantities of data to networks every time you send an email, withdraw money from an ATM, make a wireless call or even swipe a credit card. Though widely used, ownership of the lines lies largely in the hands of just a few large telephone companies, prompting 1999 rules from the U.S. Federal Communications Commission that regulate the price charged for using the lines.

The agency said its mechanism for gauging competition to grant petitions for pricing flexibility in the special access market is inaccurate, and it would not consider future petitions until more data is available to remedy the flawed system.

The decision comes after years of complaints from telecommunications companies that rent private, special access lines for services such as connecting their wireless broadcast towers to the Internet. Special access lines are also used by hospitals, government agencies as well as corporations.

"This action will at least prevent these continually rising, now exorbitant prices, from rising even further while the Commission evaluates this market failure," said Maura Corbett, executive director of the NoChokePoints coalition, which represents entities that rely on special access lines, including Sprint Nextel Corp, Clearwire Corp and US Cellular Corp.

The FCC said in an order released late Wednesday that it would initiate a mandatory data request within 60 days to help it better understand the competitive landscape of the special access market, worth about $12 billion annually, before deciding how to revamp its pricing rules.

Verizon and AT&T both welcomed the data request but said the suspension of the rules was premature.

"While today's Order acknowledges that the current rules fail to capture the full extent of existing competition, the FCC, before taking any action, should have collected the data it repeatedly has said it needs to evaluate the marketplace," said Donna Epps, Verizon's vice president for federal regulatory affairs.

Bob Quinn, AT&T's senior vice president for federal regulation, argued against what he saw as a move "to further regulate yesterday's technology" as the industry is shifting from special access to faster fiber-based IP networks.

The temporary suspension was decided in a 3-2 vote of the FCC last week, but made public on Wednesday. Republicans commissioners balked at what they also saw as jumping the gun.

"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," Republican Commissioner Robert McDowell said in a statement.

"In short, the Commission has reversed the steps that a data-driven agency should take," fellow Republican Commissioner Ajit Pai said.

The suspension will not affect pricing arrangements already in effect. The agency said it has approved six requests for pricing flexibility since 2008.

(Reporting By Jasmin Melvin; Additional reporting by Sinead Carew in New York; Editing by Tim Dobbyn)

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