Special Access and the FCC’s Regulatory Revival

[Commentary] Over the past five years the Federal Communications Commission either has, or has sought to, undermine a large part of the bi-partisan deregulatory achievements of the past two decades. On Oct 16, the FCC added on more item to this growing list when the Wireline Competition Bureau issued an Order launching an investigation into the contract terms of Special Access services offered by the nation’s largest phone companies (including AT&T, Centurylink, Frontier and Verizon). At the heart of the matter are claims by the large phone company customers (e.g., Sprint, Level 3, Windstream, BT Americas, XO, and so forth) that they are no longer happy with the terms of their contracts, including the terms for volume discounts that require the buyers hold relatively stable their purchases over the contract horizon.

The earlier FCC data request on pricing was, in the end, so limited that it will shed little light on the service. This new investigation will eventually reach its own dead end -- it’s targeted to a diversion and the deals it will study are too complex for regulatory control. What the Commission’s Investigation Order does do is signal once more to investors that this Administration is committed to shifting value out of the network core. As a result, investors will increase their assessment of risk in the sector with predictable consequences -- less competition and less investment.