October 19, 2015

Unshackle Competition – End Archaic and Unreasonable Lock Up Rules

Imagine being locked-in to paying every month for something you don’t need, or don’t use, simply to avoid a huge financial penalty. That makes no sense…except when you’re dealing with incumbent local telecom companies who dominate the market. Then, unreasonable lock-up contracts are the rule, and incumbents just keep squeezing their customers and pocketing the monopoly profits. Fortunately, the FCC and Chairman Wheeler are about to examine these market defects and address the anticompetitive lock-up contract abuse that leads to them.

Competitive broadband providers – like XO – are an important choice for businesses across America. We provide innovative, affordable, and customized broadband services to companies large and small. And the competition that we and other new entrants bring to market has driven the broadband innovations that are revolutionizing our economy. One way we’ve been able to reach businesses throughout the country is, where we have not built our own facilities, by leasing them from the incumbents telcos – and we get to do so at legally mandated reasonable rates, terms, and conditions. That’s because Ma Bell alone has facilities everywhere, which were paid for by the nation’s ratepayers. With access to these incumbent facilities, competitive firms can deliver faster and more innovative broadband services to the benefit of all telecom consumers in America.

However, despite the law, incumbents have crafted terms for access to these facilities that are so onerous that they are gatekeepers, blocking competitors from affordably reaching their customers. Specifically, because past regulators permitted the regular (rack) rates for these critical, special access facilities to be so high, incumbents only give competitors a lower rate if they agree to lock-up most of their special access purchases with them. These lock-up restrictions come in many flavors and all of them have the effect of curbing telecom competition, or slowing deployment of new fiber connections all together. Examples of these restrictions include: requiring competitive carriers to purchase large percentages of their special access needs from the same incumbent for long periods of time; imposing severe penalties that force carriers to maintain or increase their circuit volumes on services they may not even need or keep renewing agreements as they expire; and forbidding customers from counting the purchase of next-generation services, such as Ethernet, toward their total required spend, slowing the transition to new technologies. These restrictions force competitive carriers to purchase most, if not all, of their special access circuits from the incumbents, hampering their ability to invest in their own facilities or to lease the networks of other competitors. The result is the inability of a competitive special access market to really develop and control of the market remaining “safely” with the incumbents.

News of the FCC’s investigation into this abuse is welcome to XO. Even better is the impact this action will have for our customers and the health of the telecom market in general. By curbing lock-up contract abuse, the FCC is poised to accelerate new network deployment and sustain competition in the broadband space. I, for one, support this decision. I also want to commend Chairman Wheeler and thank him for his leadership on this matter. It will unshackle competitive carriers, enabling them to offer more services and more choices to customers, more affordably.

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