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For over a decade, enterprise customers, 2nd tier interexchange carriers (“IXCs”), and many Wireless carriers have argued that special access rates are inflated, priced far above “just and reasonable” levels as required by Title II of the Communications Act. Unlike various broadband and spectrum initiatives, special access reform has garnered modest media attention and is not a “Top 10 item” on the FCC’s “Broadband Agenda” (actually, its No. 39). On the other hand, the FCC’s priorities beyond the AT&T-T-Mobile merger and USF/ICC reform can change quickly.

Special Access Services. Special access services are dedicated Wireline services (physical circuits, not virtual services) that connect a customer’s premise to its Wireline interexchange carrier’s network and are purchased in high volumes by Wireless carriers for connecting cell sites to mobile switching centers.   DS1 and DS3 are the most common special access services. Rates for special access services are itemized in services agreements between IXCs and enterprise customers.  Large enterprise customers have hundreds and, sometimes, several thousand locations, each having its own special access circuit linking the sites to the “corporate network.”   These customers include retailers, financial institutions, state governments and the Federal government.  Wireless carriers have thousands of cell sites.  Special access services are also extensively used by educational and healthcare facilities as “last mile” connectivity to their Internet access providers.

Special Access Providers. The principal providers of special access services are the regulated local affiliates of AT&T, Verizon, and CenturyLink (now that it owns Qwest) and other incumbent local exchange carriers subject to FCC price cap regulation (‘the price cap LECs”).  AT&T, Verizon, CenturyLink and all other IXCs acquire special access services principally from the price cap LECs. While there is some competition for special access services in urban areas, the extent of competition is limited.  In recent years, AT&T and Verizon have managed to fend off efforts to lower special access rates, vigorously maintaining that special access services are priced competitively.  According to Verizon’s recent 10-K Report, special access service is its only wholesale service generating substantial revenues and demonstrating strong demand—5% annual growth rates in recent years.

Advocates for Lower Rates. Sprint, the Ad Hoc Telecommunications Users Committee, smaller IXCs and numerous Wireless carriers are among the members of the most recent informal coalition advocating reform of special access pricing.  Prior to becoming AT&T’s merger partner, T-Mobile was part of this coalition.

Apart from the obvious benefit of lower rates for a ubiquitous service used throughout our economy,  Wireless carriers—other than AT&T and Verizon—would secure needed cost savings, supporting their efforts to build out 4G networks.  Smaller IXCs, such as Level 3 and tw telecom, could compete more effectively for business from the largest enterprise customers.  In addition, the competitive advantage of AT&T, Verizon and Century Link (special access is a revenue source for these mega-carriers, not solely an essential cost ) over other IXCs would be mitigated to some extent.   Up to several $ Billion annually are at stake.