CLECS predict much less choice for business customers.

The net effect of the recent FCC decision granting AT&T the right not to resell packetized and broadband services will be fewer service options for business customers, say competitive service providers.

Frustrated by a ruling that is based on what they believe is faulty information or bad reasoning, CLECs are holding out some hope for more favorable FCC action on a special access docket, which affects the prices and conditions under which they buy DS-1 and DS-3 services. But even with pressure from Congress to maintain competition, the outcome of that proceeding is uncertain.

“These things are hard to predict,” said Kelsi Reeves, vice president of federal government relations for Time Warner Telecom. “It will continue to rely on what Commissioner [Robert] McDowell does. There is a great deal of political pressure to do something on this. Many members of Congress from both sides of the aisle have contacted FCC and written letters about what everyone agrees is a broken system. But it will depend on what he does.”

McDowell is one of three Republicans on the FCC, but he also came out of the competitive service industry. He voted with his fellow Republicans to grant AT&T forbearance over the two dissenting Democrats.

The frustration for CLECs is based on the fact that there is still very little competition for the last 100 feet of network connections — those that tie office buildings to metro networks such as fiber optic rings — and those connections become very expensive when deregulated. Time Warner Telecom has been negotiating with Verizon, which earned its forbearance for broadband and packetized services in March 2006 but has been unable to come to terms, Reeves said.

“This is what the business customers purchase,” said Anna Gomez, vice president of regulatory affairs for Sprint Nextel. “They are going to buy a package of enterprise broadband services from us, and part of that is going to be last-mile connections that we have to purchase wholesale from AT&T or Verizon in order to complete the package.”

When the FCC looks at competition in the business space, it doesn't realize how much of it is based on wholesale buys of last-mile access, she said. “You should not grant forbearance for the wholesale special access products and also deregulate the retail product,” Gomez said. “You can't rely on just the retail competition numbers, you have to look at how much of that retail depends on the wholesale for the final 100 feet.”

The ruling also will affect the cost of wireless backhaul, according to Sprint Nextel, which found only 2% of its 50,000 base stations have alternative access.

Part of the CLECs' problem, however, is getting their voice heard in Washington now that the two loudest competitive voices — AT&T and MCI — have been co-opted by the incumbent LECs. Speaking at the Telephony LIVE conference in Dallas, Larissa Herda, CEO of Time Warner Telecom, said the industry, including business customers and service providers, need to join together with one voice to get Washington's attention.