Posted: 07/1999
Decision on Contract Pricing Expected in August
By Kim Sunderland
Incumbent local exchange carriers (ILECs) are pushing for contract pricing to long distance carrier and corporate customers. That is, they want the ability to set prices on an individual--and confidential--basis with customers.
But, according to the Association for Local Telecommunications Services (ALTS), this could lead to ILECs' offering services under cost for their customers while not bringing down costs for competitor carriers as quickly as they should.
"IXCs (interexchange carriers) want access charge reductions. ILECs (competitive LECs) want contract pricing. If the FCC (Federal Communications Commission) does both, it's a lose-lose for CLECs," says ALTS President John D. Windhausen Jr.
The FCC is trying hard to come up with pricing flexibility for ILECs prior to August.
"And we don't think there's sufficient competition for this to happen," says Emily Williams, senior attorney with ALTS. "Why should they get such flexibility when they haven't properly opened up their markets?"
Denver-based US WEST Inc. filed a petition last year requesting that the FCC forbear from regulating the ILEC as a dominant carrier in the provision of high-capacity services in the Phoenix metropolitan statistical area (MSA). Specifically, US WEST seeks lenience from various dominant carrier regulations, including the requirement that it file tariffs with cost support, price cap and rate of return regulation, and requirements that it charge averaged rates throughout Arizona.
In its petition, US WEST claims the Phoenix market for high-capacity services is "robustly competitive," and that it faces "intense competition from both resellers and five established facilities-based competitors with substantial resources [and] extensive fiber networks." US WEST argues that its market share is declining steadily, while competitors' market share grows even more rapidly than the rapid growth in the demand for high-capacity services in the Phoenix area.
US WEST filed another petition in late 1998 asking the FCC for similar relief to provide high-capacity special access and dedicated transport services in the Seattle MSA. US WEST wants to de-average its rates geographically, file tariffs on one day's notice, and offer contract-based pricing, volume and term discounts, and promotional options there.
San Antonio-based SBC Communications Inc., Hoffman Estates, Ill.-based Ameritech Corp. and New York-based Bell Atlantic Corp followed suit this year when they each filed similar petitions seeking slightly different relief.
The FCC, under Section 10 of the Telecommunications Act of 1996, has a year to grant--or deny--the request, or it's automatically granted. Within that time limit, the FCC also has the option of taking another 90 days to decide. Common Carrier Bureau Chief Lawrence E. Strickling says the commission is "looking at a more comprehensive way ... to propose an overall template for dealing with these requests for flexibility," and a plan could be released this month or in early August.
But ALTS wants to know why the ILECs should be granted such relief when they've still got a stranglehold on the CLECs.
"Pricing flexibility depends on the presence of competition, so if in fact there is a 'stranglehold,' and there isn't any competition, there won't be pricing flexibility," Strickling says. "Having said that, there has been a certain amount of competitive activity, primarily in metropolitan areas, and to the extent that that activity rises to certain levels, we think it justifies relaxing some of the requirements that exist on the incumbents today.
"But we certainly understand the connection between being able to measure and understand the level of competition that's present as the trigger for what level of pricing flexibility might be provided," he continues. "I can assure ... ALTS that if an [ILEC] has only lost a small percentage of the market, we're not going to deregulate them. It's just not going to happen."
