Telcos spar over service pricing

Representatives from both local and national telecom companies fought over the future of telecom service pricing during a House Energy Subcommittee hearing Tuesday.

The companies’ arguments stemmed from the FCC’s decision last year that lifted restrictions on what Verizon could charge its competitors for high-speed data services. Because many carriers rely upon infrastructure owned by telcos such as Verizon, AT&T and Qwest to provide last mile connections for their customers, many providers have expressed concern that companies owning last mile infrastructure could now have the power to price competition out of the market.

Tom Tauke, Verizon’s executive vice president for public affairs, argued during the hearings that the FCC should grant other companies’ forbearance petitions, thus giving them the power to price their high-speed broadband services whatever they choose. Currently, both Qwest and AT&T have filed forbearance petitions and are awaiting word from the FCC. Forbearance petitions typically let incumbent carriers obtain FCC waivers from rules requiring them to offer their “local loops” to smaller companies at competitive rates. Critics say the petitions deprive communities and businesses of access to affordable and innovative new broadband services.

“Similar freedoms granted to Verizon almost a year and a half ago have been a dramatic success story,” said Tauke, who noted that the lift on pricing restrictions had given Verizon “the flexibility to craft customized solutions to better meet the needs of our customers.” He also accused companies who opposed granting forbearance of “trying to use regulatory measures to undermine a successful market-based business environment.”

On the other side of the argument was Brad Evans, the chairman of Virginia-based Cavalier Telephone & TV. Evans said that Verizon’s desire for forbearance was part of a determination to “eliminate all competition by any means possible.” Specifically, he said that granting forbearance petitions to Verizon and other telcos would hurt other companies’ ability to provide last mile connectivity.

“The last mile of copper wires is essential to Cavalier’s ability to compete,” he said. “It has allowed us to provide new innovations by inventing startling new uses for copper facilities.”

Time Warner Telecom CEO Larissa Herda sided with Evans in the dispute and argued that granting AT&T’s and Qwest’s petitions would stilt the spread of Ethernet services to American businesses.

“The only practical means of expanding the availability of Ethernet services is for the FCC to mandate lower incumbent lower exchange carrier (ILEC) Ethernet wholesale prices,” she said. “That will not happen if the FCC grants the forbearance petitions that are now pending before the agency.”

Even telcos that weren’t present at the hearing made their voices heard. Heather Gold, the president of external affairs at XO Communications, released a statement today asking Congress to “fix the broken forbearance process” and also to urge the FCC to dismiss the companies’ petitions.