AT&T Files to Eliminate Longer-Term Special Access Contracts
AT&T filed tariff changes that would limit future special access contracts to no longer than 36 months. The prospect worries competitive providers and other purchasers of special access services. They say eliminating longer contracts also eliminates discounts, and is effectively a rate increase. AT&T needs FCC approval for the change to go into effect, an AT&T spokesman said. That approval will happen automatically in 15 days unless the commission suspends the tariff. Petitions to reject the tariff are due by Dec. 2, an FCC spokesman said.
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AT&T expects to have fully transitioned its customers from TDM to IP network architecture by 2020, said Senior Vice President-Federal Regulatory Bob Quinn in a blog post Monday (http://bit.ly/IdRQPS). To do that, AT&T needs to “align the commitments we make to our customers with the goal of transitioning to an all-IP network,” Quinn said. “That is why today we have taken a step to make sure that multi-year commitments we enter into today for aging TDM-based services reflect the on-going transition to IP and do not extend beyond the expected completion of our transition in 2020."
AT&T has plans offering discounted special access service for up to seven years, a spokesman said. “Since our goal is to turn off the TDM infrastructure by 2020, we can’t offer any services that are still on TDM by that time.” Although AT&T plans to limit new DS1 and DS3 contracts to 36 months, anyone who already bought a longer-term plan will be “grandfathered” and allowed to keep that plan, Quinn said. The 500-page tariff filing Monday doesn’t change the prices of the plans it retains, the spokesman said.
Some were wary about AT&T’s true motives. “It’s a little cynical for them to say, ‘I'm killing my seven-year plans because the network will be different by then,'” said Colleen Boothby of Levine Blaszak, who represents high-volume corporate customers of special access services. “They're just making a cheap price point go away,” she said of AT&T. “This is about price management, not network technology."
"These changes are about encouraging customers under term commitments to migrate from TDM to IP-based services,” the AT&T spokesman told us. Applying the five- or seven-year rates to three-year term commitments “would just incent carriers to stay on outdated TDM based services as opposed to moving forward to a technically advanced IP-based solution that offers customers the services and capabilities they will want in the future,” he said. AT&T offers fiber ethernet services that have multiple year terms, the spokesman said.
"It appears that AT&T is interested in raising prices because otherwise it could lower the prices on the shorter term plans,” said Angie Kronenberg, Comptel general counsel. Comptel’s members frequently take advantage of the long-term discounts, so the change would raise prices because discounts on the shorter-term plans are “significantly smaller,” she said. “There is insufficient competition to curb AT&T’s abuse of market power, as demonstrated by its proposal."
"AT&T’s rate hike sneak attack is a real turkey,” said ex-Rep. Chip Pickering, R-Miss., now a Broadband Coalition spokesman. “With the elimination of long term service plans, AT&T will raise rates on small and medium sized business by 15 to 25 percent.” The coalition began a new website, RateHikeSneakAttack.com, which features a 15-day countdown clock tracking the time the FCC has to suspend and investigate the tariff. Thomas Jones, who represents tw telecom and other CLECs, called it a “huge unilateral rate increase” imposed on competitors and business customers. “Only a firm with market power can impose such a rate increase without worrying that it will lose significant market share,” he said.
Windstream urged the FCC Friday to suspend and investigate AT&T’s pending tariff filing, and “take any actions needed to avoid anticompetitive effects” (http://bit.ly/18jZMv2). Windstream buys large quantities of last-mile access from AT&T under special access tariffs, and eliminating the longer-term discount plans is “effectively a rate increase,” the telco said. Windstream will either be forced to pay higher rates, or purchase “the closest bandwidth Ethernet equivalents,” which are “frequently not suitable,” it said.
Cbeyond, EarthLink, Integra, Level 3 and tw telecom met with aides to commissioners Ajit Pai and Jessica Rosenworcel last week to argue against the proposed changes. “In many situations, competitive carriers have no choice but to rely on five-year term discount plans for DS1/DS3 services in order to provide downstream retail services to business customers, and AT&T’s proposed effective rate increase would be extremely harmful to competition and businesses,” they wrote in an ex parte filing (http://bit.ly/1fDRLmR). Eliminating the five- and seven-year discounts would “cause significant harm to competition by raising rivals’ costs and potentially yielding higher business broadband prices,” they said.
AT&T’s ability to eliminate discounted plans without losing customers is proof positive that the special access market isn’t competitive, Boothby told us. “You don’t dictate to customers with options; you rush to meet whatever demand they're looking for.” There are a lot of advantages to IP networks, Boothby said, and there’s an “inevitable natural evolution” of technology, but when AT&T uses that technological evolution “to manicure price points unilaterally in the market, you have to ask yourself: How competitive can this market be?”