NCTA Knocks Incompas/Verizon Special Access Proposal, Wheeler Remarks

NCTA voiced "significant concern" about last week's Incompas/Verizon proposal and supportive remarks Monday by FCC Chairman Tom Wheeler that suggest cable and other facilities-based competitors could have their business data services (BDS) subjected to "ex ante rate regulation" (see 1604070069 and 1604110065). "Any such proposal would reverse decades of bipartisan Commission policy and should be eliminated" from an item to be considered at the agency's April 28 meeting (see 1604080011), NCTA said in a Wednesday filing in docket 05-25 on meetings Monday with aides to Commissioners Mike O'Rielly and Mignon Clyburn. Wheeler, O'Rielly and Clyburn staffers didn't comment.

NCTA said regulating the rates of competitors would discourage new investment in facilities, including for 5G wireless backhaul. USTelecom said rate regulation of any BDS provider, whether incumbent or competitor, would undermine investment in new connections for 5G backhaul and business end users. AT&T made a similar statement Tuesday (see 1604120045). Verizon, Incompas and other ILEC competitors welcomed Wheeler's draft Further NPRM and ILEC tariff investigation order, while American Cable Association and NCTA representatives voiced some concerns (see 1604080055 and 1604110030). The NCTA filing detailed further concerns.

NCTA said the FCC hadn't regulated the rates of facilities-based competitive providers over recent decades, with one "narrow exception" regarding CLEC access charges that didn't apply to the BDS market. The group said the Incompas/Verizon proposal's "fundamental flaw" is the suggestion that regulation of all providers is warranted if competition is found to be insufficient. "Given that the status quo in the business data services marketplace is that price cap carriers generally are considered dominant carriers, any finding that competitive entry has been insufficient to affect the prices offered to consumers (e.g., because competitors do not offer the same range of services or their networks have limited geographic reach) necessarily means that the incumbent LEC remains dominant and should be regulated accordingly," NCTA said. Eliminating the dominant/nondominant distinction "makes no sense," particularly in light of Wheeler's assertion that more than half the country has no BDS competitive choice, it said.

NCTA said incumbent telco BDS rates shouldn't be routinely regulated. The record shows the market is more competitive than ever, with cable market share increasing, and ILECs responding by improving service and lowering prices, the group said. "Such competition generally should be sufficient to ensure that rates paid by end users are reasonable," it said. "But if the Commission finds in any particular area that the prices charged by incumbent LECs are not responding to competitive entry, then the most logical approach is to continue regulating the rates charged by the incumbent carrier, not to impose rate regulation on new entrants."

Rate regulation of competitive providers would be counterproductive, undercutting competitor incentives and ability to invest in new facilities, NCTA said. Encouraging facilities-based competition is "far superior" to encouraging competitors to rely on wholesale service at regulated rates, said the group, which cited Wheeler comments from an Ars Technica story: "competition is a facilities-based issue. ... You want to create environments where people are going head to head ... how can you ever win if you have to buy your capacity from your competitor?" Said NCTA: "Any departure in this proceeding from the Chairman’s general 'facilities-based proclivity' would be a matter of deep concern to the cable industry, which has spent billions of dollars on facilities to better serve business customers."

NCTA questioned Wheeler's view that BDS regulation may be needed to spur 5G deployment. "The theory that regulation of these services will help fill the need for 5G backhaul is completely backwards," it said. "If 5G services will need denser and more robust backhaul starting a few years from now, the Commission should be taking steps now to encourage the construction of those facilities. But what provider is going to pursue this market opportunity if the 'reward' for taking the risk of building new fiber facilities is an obligation to provide access to wireless carriers at rates established by the Commission? It is particularly outrageous to suggest that Verizon somehow will be incapable of deploying 5G unless it can obtain these services at below-market regulated rates given its longstanding opposition to exactly such a regulatory regime until its self-serving flip-flop last week."

NCTA is concerned the FCC may make tentative conclusions based on analysis from an agency consultant that hasn't been subjected to public review. "The record in this proceeding includes the largest data collection ever conducted by the Commission and the public record makes clear that interpretation of that data is an exceedingly complex and controversial matter. It would be wholly inappropriate for the Commission to reach any tentative conclusions about the state of the marketplace or the appropriate course for regulation based on a non-public analysis prepared by a single entity," it said.

USTelecom said new fiber is needed to connect thousands of 5G cell sites along with many U.S. businesses. In a blog post, Senior Vice President Jon Banks said the recent U.S. experience with 4G rollout contradicted the view that BDS regulation was needed to provide 5G wireless backhaul. The growth of 4G, backed by fiber upgrades of copper, has been more rapid in the U.S. under deregulatory FCC policies than under Europe's heavier regulation, he said.

"The commission should learn from its own success: 4G worked," Banks said. BDS competition and investment are growing under current policies, he said. "Changing ground and forcing the first companies -- whether traditional telcos, CLECs or cable providers -- that invested in constructing facilities to deliver business data services to simply turn them over at FCC-set prices to companies that choose to skip their own investing will not connect us to new 5G services or incent investment to get American businesses and consumers the modern facilities they need to compete in today’s global economy."