CCIA Asks DC Circuit to Tell FCC to Rule on Monopoly Pricing for Internet Access

BY CCIA Staff
July 25, 2011

In January 2005, the FCC opened a rulemaking docket to the FCC’s regulation of the “special access” rates that businesses and millions of customers pay to the largest telephone companies for broadband connections to the Internet.  Despite overwhelming evidence of wildly excessive pricing (profit margins for companies that control high-capacity broadband lines are over 100%), the FCC has failed to take action.

In response to the FCC’s inaction, CCIA, along with a broad group of broadband carriers, customers, public interest organizations, and trade associations, recently filed a Petition with the United States Court of Appeals for the District of Columbia asking the Court to issue a writ of mandamus requiring the FCC to produce an appealable order in its rulemaking proceeding on special access within six months.

What is special access?

Special access services are the high capacity broadband lines used by businesses and communications services providers to distribute large volumes of data traffic that eventually reach end-users.

Without special access, businesses, governments, non-profits, and other entities would be unable communicate with individual end-users.  Individuals looking to access information or services on the Internet, attempting to communicate with government offices, and trying to download the latest app on a mobile device, would be unable to do so without special access.

Why is action needed on special access?

In 1999 the FCC adopted special access pricing rules that remain in effect today.  The 1999 rules deregulated prices based on the assumption that competition would develop in the special access market.

Ultimately, the market never became competitive, as giant telephone companies like AT&T, CenturyLink/Qwest, and Verizon became monopoly providers of broadband services to businesses in their geographic service territories.  As a result of deregulation, control over a vital input to a must-have service, and monopoly pricing, special access providers charge companies and consumers more than $10 billion a year in over-earnings and generate a profit margin of over 100%.  That’s a $10 billion annual telecom tax on the rest of the U.S. economy!

We can no longer afford uncompetitive special access pricing.  Businesses and entrepreneurs should be innovating and investing in their businesses and putting Americans to work so we can grow our economy, create the next great product or service, and regain our competitive edge.

Reasonable, cost-related special access will have significant benefits for the American economy.  With regulated special access rates, American businesses will increase their output, about 100,000 jobs will be created, approximately $4-$5 billion will be added to payrolls, and value added to the U.S. economy will be between $11.8-$12.4 billion.

Why go to court?

In 1999, the FCC knew the special access market wasn’t competitive, but, based on rosier predictions, it deregulated the market anyway.  Since 2005, the FCC has realized it made a mistake by deregulating the market, but for over six years it has failed to take action to fix its mistake.

By delaying dealing with monopoly special access prices, the FCC has failed to perform one of its core functions of ensuring that special access pricing is just and reasonable.  This delay is despite the fact that monopoly pricing continues to harm competition, the economy, and consumers.

CCIA and a coalition of other interested parties has filed a Petition for a writ of mandamus to compel the FCC to do its job and protect American businesses and customers from excessive special access rates.

Until the FCC releases a final order in the special access proceeding, federal courts of appeals don’t have jurisdiction to review the FCC’s record.   Thus, by failing to release a final order, the FCC has essentially deprived the Court of Appeals for the DC Circuit of jurisdiction.  By petitioning for a writ of mandamus, CCIA is asking the Court of Appeals for the D.C. Circuit to order the FCC to release its order within six months so that it can be appealed should it fail to ensure reasonable prices in the special access market.

Without reform on special access, our economy will continue to have a $10 billion anchor weighing it down.  As American businesses struggle to keep their doors open and make payrolls, and American workers struggle to stay in their homes, monopoly special access providers rake in their ill-gotten gains.  Special access reform is needed now to spur growth, innovation, and investment in our information economy!

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