CenturyLink: Incompas-Verizon proposal would drive drastic Ethernet rate reductions, proposes counter framework

CenturyLink says that if the FCC were to adopt the Verizon-Incompas model for special access reform it would drive “extreme and arbitrary” rate reductions for its service while inhibiting competition in the overall market.

By implementing the suggested rate reductions, CenturyLink said the FCC will distort and deter competition in the business data services (BDS) market.

If the proposal went through, CenturyLink claims it would have to reduce “Ethernet rates in the company’s eight interstate service guides by between 37 percent and 89 percent, with a company-wide weighted average reduction of these standard rates of 49 percent.”

Interestingly, Frontier, which often sided with CenturyLink on special access re-regulation, joined Sprint and Windstream to support part of Verizon and Incompas' proposal, specifically price caps for BDS.

However, Frontier does not agree with the joint proposal beyond the element that deals with TDM-based special access services. 

"Although we focus exclusively on TDM in this joint proposal, Sprint, and Windstream continue to support and advocate for the remaining elements of the Verizon and INCOMPAS proposal, including Ethernet reform," Frontier said in the filing. "Frontier does not support such Ethernet reform."

While the original Verizon-Incompas proposal called for a two-year transition period to implement new BDS pricing, a letter the three service providers sent to the FCC suggested additional “transition mechanisms” depending on the type of service provider and its footprint in areas where special access services are required in order to deliver wholesale data services to enterprises at competitive rates.

Echoing similar concerns raised by AT&T and cable operators like Comcast and Mediacom, CenturyLink said that if the telco was forced to cut Ethernet rates it could make it more difficult to extend fiber facilities to deliver Ethernet in new areas.

“The economic incentives to pursue new infrastructure deployment are already challenging given the competitive nature of the Ethernet marketplace, which creates uncertain return on that investment,” CenturyLink said. “Slashing rates in the manner envisioned by the Proposal would make that business case all the more difficult, contravening the Commission’s broadband objectives and, as noted above, undermining important universal service goals as well. “

Under the CenturyLink proposal, the telco laid out four different elements:

  • Services over 50 Mbps services would be deemed competitive.
  • For services between 10 Mbps and 50 Mbps, a census tract will be subject to a competitive market test, and deemed competitive if three or more providers have facilities in or within 2,000 feet of that census tract.
  • Services under 10 Mbps (such as DS1 links) would be subject to a separate competitive market test from services with speeds above that threshold, and offerings provisioned using Ethernet over HFC would be counted as competing offerings.
  • All product markets, services provisioned using unbundled network elements (UNEs) would be counted as competing offerings.

CenturyLink said its proposal “offers a reasonable alternative to the other approaches that some parties have advocated.”

“Most of the recent special access proposals do not represent an industry consensus approach and fail to provide a reasonable test for measuring real competition,” said John F. Jones, CenturyLink senior vice president of public policy and government relations, in a statement. “CenturyLink’s proposal fills that important gap with a simple, easy-to-understand framework that recognizes the competitive reality of today’s business data services marketplace.”

For more:
- see this FCC filing (PDF)
- and this FCC filing (PDF)

Related articles:
Sprint, Frontier, Windstream back Verizon-Incompas price cap proposal on BDS
Verizon-Incompas BDS proposal may be Wheeler's likely gambit as vote nears: analyst
Verizon-Incompas special access proposal gets support from state and local groups
Verizon, Incompas may draw fire from AT&T, CenturyLink on new BDS proposals