Cable Takes Aim at Possible BDS Regulation; AT&T Says Fiber Builds Feasible

The cable industry sought to head off possible FCC regulation of its business data services (BDS) that could be teed up under a draft Further NPRM. Cable regulation would fly in the face of Chairman Tom Wheeler's resistance to rate regulation of broadband providers in the net neutrality context, cable officials said. "Nothing in the record of this long-running proceeding remotely supports reversal" of four decades of "highly streamlined" treatment of facilities-based new entrants in a market, NCTA said Wednesday and Thursday, summarizing its meetings with senior FCC officials, including one attended by other cable players. It's doubtful cable "best efforts" services would be subjected to rate regulation in this proceeding, industry stakeholders told us Thursday, but some said other cable BDS offerings could be.

AT&T touted new FCC data on the location of competitor fiber networks as demonstrating the feasibility of rivals building new links rather than relying on regulation to lease incumbent BDS (special access) lines. "The new, more precise data show even more dramatically that the vast majority of locations with special access demand are extremely close to multiple facilities-based competitors -- indeed, in most cases, within a few hundred feet," the telco said.

Other parties made FCC lobbying visits and filings in the proceeding, as the agency heads toward a scheduled April 28 vote on Wheeler's draft FNPRM and tariff investigation order. The order would ban ILEC "all or nothing" discount provisions and restrict "shortfall" penalties on special access customers not meeting volume or term commitments. Verizon discussed "all or nothing" plan transitions in one meeting.

The Competitive Carriers Association, Incompas, Sprint, T-Mobile and U.S. Cellular urged the FCC to adopt policies to ensure "reasonable access to high-capacity" BDS offerings consistent with a "technology neutral" framework proposed by Incompas and Verizon (see 1604070069). "Access to high capacity BDS at reasonable prices -- as Chairman Wheeler says ‘fast and fair’ -- is vital for wireless providers to meet the current demand for wireless broadband services and to build next generation mobile broadband networks," they said in a letter. Sprint, T-Mobile and U.S. Cellular are Incompas members.

Cable representatives voiced their concerns to eight senior FCC officials Monday, including Wheeler aide Gigi Sohn, General Counsel Jonathan Sallet and Wireline Bureau Chief Matt Del Nero. NCTA officials were joined by representatives of the American Cable Association, Cablevision, Charter Communications, Comcast, Cox and Time Warner Cable. NCTA officials met with aides to Commissioners Jessica Rosenworcel and Ajit Pai Tuesday. NCTA submitted filings for both meetings (here and here) in docket 05-25.

Cable has invested billions of dollars in facilities to serve business customers, leading to improved service and lower prices, but possible regulation would "jeopardize the progress" cable has made, the NCTA filings said. The association said rate regulation of competitive providers wouldn't only be unwarranted but also counterproductive, reducing cable's incentive and ability to invest. "In the context of broadband Internet access services (BIAS), Chairman Wheeler has consistently recognized the harmful effect that rate regulation can have on investment incentives and, for that reason, the Commission explicitly forbore from any ex ante rate regulation of those services," said NCTA. "Any imposition of rate regulation on [cable] business data services would have precisely the same effects the Commission sought to avoid in the Open Internet Order.”

It's unlikely the FCC will rate regulate cable "best efforts" offerings in the rulemaking, said a non-cable stakeholder, citing the precedent against BIAS rate regulation in the net neutrality context. The stakeholder said the commission was looking at making some tentative conclusions and asking lots of questions in the FNPRM. There could be tentative conclusions about the appropriate product market, for instance, the stakeholder said, but cable "best efforts" Internet access isn't seen as comparable to incumbent telco special access. Such a tentative finding would suggest that ILEC special access market shares wouldn't be diluted by cable "best efforts" offerings. Other industry stakeholders agreed, but said "dedicated" cable Ethernet services could be counted and in regulatory play.

USTelecom said all competitors must have incentives to invest in broadband facilities. "Any test for determining where BDS competition does and does not exist must consider all broadband service offerings currently used by business customers, including cable offerings inaccurately referred to as 'best efforts' services," said the ILEC group, in a filing on a meeting with an aide to Commissioner Mike O’Rielly.

AT&T said CLECs mischaracterize how the special access market works. Competitors build "extensive fiber networks" close to locations with special access demand and then bid for contracts of nearby customers, said an AT&T filing. If a competitor wins the bid, it builds a lateral connection to serve customers in a building, said the ILEC, saying the DOJ repeatedly has found that CLECs constrain ILEC prices in buildings sufficiently close to their competitive networks. Data collected by the FCC shows competitors have built fiber in 95 percent of the census blocks with special access demand, containing almost 99 percent of business establishments, the telco said.

Newly released FCC data show the competitive fiber is even closer than the census-block data suggested, AT&T said. Buildings currently served only by ILECs are just 364 feet, on average, from the closest CLEC fiber network, and half are within 88 feet, the Bell said. "If the Commission intends to follow the data, the only viable and defensible conclusion is that the special access marketplace is robustly competitive." TDS recently said it's not the distance to the nearest competitor fiber line but to the nearest splicing point that matters (see 1604150072).

Verizon said the FCC should seek comment on how to structure BDS regulation in markets deemed not sufficiently competitive. In particular, comment should be sought on: "1) the structure of a price cap regime for new services and providers; 2) regulatory structures that encourage competitive entry; 3) regulatory structures that will not impede the transition to IP services; 4) wholesale obligations; and 5) transitions for all or nothing discount plans," the Bell said in a filing on a meeting with an aide to Commissioner Mignon Clyburn.

Frontier Communications argued against new special access regulation, in a filing on an FCC meeting. Windstream supported a "technology neutral regime of appropriate controls" where competition is insufficient, in a filing on an FCC meeting. Windstream also asked for inclusion of various specific questions in the FNPRM.