The Truth About Special Access

1
The Truth About Special Access

Donna Epps Vice President Federal
Regulatory Verizon
2
What Are High Capacity Services?
Business
IXC/CLEC Location
Wire Center
Cell Cites (Backhaul)
High Capacity Transport
Large Business (End-Users)
DS1/DS3 Last Mile
Wire Center
3
Who Buys Special Access Services?

• Retail
• Financial Institutions
• Universities
• Government Agencies
• Corporations

• Wholesale
• CLECs
• Wireless Providers
• LECs

Highly sophisticated business customers who
leverage their buying power to negotiate
substantial discounts
4
The High Capacity Services Marketplace is
Competitive

• The FCC has found that high capacity services
  such as special access are competitive.
• We find that myriad providers are prepared to
  make competitive offers Competition for
  medium and large enterprise customers should
  remain strong . . . because they are
  sophisticated, high-volume purchasers of
  communications services . . . and because there
  will remain a significant number of carriers
  competing in the market. Verizon/MCI Merger
  Order at para. 74.
• In prior proceedings, Verizon has demonstrated
• There is an average of 19 competitive networks in
  the top 50 MSAs.
• In Verizons region, there is competitive fiber
  in nearly two-thirds of the Verizon wire centers
  that account for 80 percent of Verizons demand
  for high capacity services.

5
The High Capacity Services Market Is Competitive

• Who are the competitors? Traditional players like

• And new players like

VZs Challenge Uncovering Deployment Of
Competitive Facilities.
6
Prices Customers Pay for Special Access Have
Declined

• Due to competition, the special access prices
  customers pay have declined in both regulated and
  non-regulated areas.
• In prior proceedings, Verizon has demonstrated
  that
• For special access services overall, the prices
  customers pay have declined by an annual rate of
  16 percent.
• From (2002-2004), prices customers pay for DS1
  and DS3 loops have declined annually by 5 and 7
  respectively. This is even faster than would
  have been required by the FCCs price cap rules.

7
Proponents of More Regulation Misconstrue the
Facts About Pricing

• Proponents erroneously point to high capacity
  sticker prices to argue rates are excessive.
• ILECs offer discounts of 40-70 percent off the
  sticker prices. The majority of customers
  purchase under discount plans.
• Proponents deliberately do not reveal the prices
  they actually pay for services.

8
Proponents of More Regulation Misconstrue the
Facts About Rates of Return

• Proponents erroneously point to ARMIS data which
  the FCC has recognized should not be the basis of
  setting rates.
• FCC uses ARMIS data to ensure ILEC compliance
  with certain regulatory accounting and cost
  allocation rules.
• ARMIS data were never designed to evaluate rates
  and are not set up to accurately measure real
  business rates of return.

9
The GAO Special Access Report

• GAO concluded the FCC should gather better
  competition data.
• GAO confirmed that since the advent of the
  pricing flexibility regime, customers are paying
  less for special access in both regulated and
  non-regulated areas.
• Some of GAOs other conclusions were flawed
  because it had incomplete data.
• Competing providers did not provide GAO with the
  information it needed to properly assess the
  market for its study.
• Page 59 of the GAO report states "We were unable
  to collect data on prices that competitive firms
  charged therefore, those prices are excluded
  from this analysis. We asked competitive firms
  to supply prices, however, they did not.