FCC May Modify Draft BDS Proposals; Presumptive 50 Mbps Dividing Line in Play

The FCC could modify proposals to revamp its special access framework for “business data services,” informed sources told us Wednesday. There likely will be some changes to a proposed rulemaking, one source said. Another suggested draft tentative conclusions could be watered down. The FCC is to vote on a business data service (BDS) item at its Thursday meeting, after Chairman Tom Wheeler circulated a draft Further NPRM that proposed a "technology-neutral framework" and an accompanying ILEC tariff investigation order to ban "all or nothing" discount plans and restrict early termination fees and volume shortfall penalties (see 1604080011). NCTA and AT&T made public statements Wednesday criticizing the FCC direction, while Public Knowledge issued a supportive statement.

FCC officials had said the FNPRM would seek comment on many questions, but sources said the draft also proposed some tentative conclusions. “The tentative conclusions are focused on discrete issues, like whether carriers can raise rates at the end of a contract,” an FCC official told us this week. “On the bigger issues, such as the regulation of ubiquitous networks, we just seek comment.”

FCC analysis showed the absence of market power in higher-bandwidth BDS services, which is why the draft tentatively concluded there shouldn’t be rate regulation of services above 50 Mbps, the agency official said. Level 3 opposed such a tentative conclusion, urging the commission not to presume that BDS offerings of more than 50 Mbps are subject to effective competition (see 1604250041).

Democratic commissioners asked for some changes to the draft item, an informed source said. The proposed edits target how to structure a test for deciding whether markets are competitive and also sought to eliminate tentative conclusions, the source said, suggesting the tentative conclusions could be scaled back or eliminated. The source said there was a general expectation the Republican commissioners would dissent, and others had offered a similar sense (see 1604120045). But an industry representative said the Republicans might still concur on the Further NPRM to better maintain leverage in the rulemaking. The representative also said Wheeler's "aggressive" proposed comment time frames are getting pushback from at least one Democrat.

Whether the tentative conclusions remain in or are taken out is a “big deal,” another industry representative said, because it gives a better sense of the commission’s intended course. “What they want to do is bring DS1s and DS3s under price regulation, and if you do that, and benchmark Ethernet to those regulated rates, you’ve effectively regulated all Ethernet, no matter who’s deployed it, incumbent LEC, cable or CLEC.” Incumbent telco DS1 (1.5 Mbps) and DS3 (44 Mbps) circuits are the main transmission links below 50 Mbps.

NCTA said the FCC has recognized for decades that new entrants shouldn't be subject to rate regulation. "Until now," it said in an online statement. "Chairman Wheeler’s proposal to regulate rates for business data services, including rates charged by competitive providers, seems to have forgotten this basic logic." Cable "is still the new kid on the block," but Wheeler's proposal "jeopardizes" the progress the industry has made, NCTA said. "Chairman Wheeler has attempted to defend this proposal by suggesting that the marketplace for these services is a failure and that an entirely new set of technology-neutral rules is needed. Such a theory cannot be reconciled with the fact that cable operators have entered the market and invested billions in new facilities to bring better services and lower prices to millions of businesses. That is the definition of an increasingly competitive marketplace, not a failing one," it said.

AT&T took note of the new BDS name for special access services but wasn't impressed. "Despite the new moniker, we fear that this proceeding will just be more of the same -- a proposal to increase regulation on services provided by those actually investing in fiber (incumbent providers (ILECs) and cable companies) to benefit a handful of companies that want to continue avoiding investing in fiber infrastructure themselves," said Caroline Van Wie, vice president-federal regulatory, in a blog post. "By proposing regulations that favor a handful of companies that would prefer not to invest in last-mile infrastructure, the FCC would discourage fiber build-out by everybody. If the Commission really wants to drive fiber infrastructure investment and increase facilities-based competition, it should instead approach BDS regulation with one driving question: How will the policies we adopt here incent companies to deploy more last-mile fiber in the United States? That’s the question I’ll be looking for in [Thursday's] FNPRM but, based on this Commission’s track record, I don’t expect to find it."

Public Knowledge lauded Wheeler's proposals. "Earlier this month, Chairman Wheeler took a critical step forward, signaling that relief from decades of monopoly and duopoly control over the special access marketplace is finally on the horizon," PK President Gene Kimmelman said. "The Commission has everything it needs to open this marketplace to competition and we’re encouraged by the Chairman’s commitment that has landed this decades-old issue on the FCC’s open meeting agenda. During this week’s meeting, we urge Chairman Wheeler to begin laying the policy groundwork that will result in true competition for business data services." Competify circulated a "Fact Sheet" about "Chronic Broadband Access Control."