AT&T, Allies Say BDS Competition Strong and Getting Stronger; Rivals Disagree

AT&T and ILEC allies said the business data service market is flourishing, and heavy-handed regulation would undermine investment and facilities-based competition. But rivals of incumbent telcos continued to press their case for regulating a business broadband market they say is dominated by ILECs, and Incompas and Verizon offered new details for establishing Ethernet "benchmarks" and a competitive market test as part of their joint proposal to establish a new regulatory BDS framework. Some parties issued news releases and statements to frame the BDS debate as reply comments were due Tuesday in the FCC's rulemaking in docket 16-143 initiated by a Further NPRM (see 1604280057).

“Everyone is entitled to his own opinion, but not his own facts," said Caroline Van Wie, AT&T assistant vice president-federal regulatory, in a blog post. "The facts show that competition in the BDS market is thriving. Even as of 2013, competitors had deployed competing facilities in more than 95% of MSA [metropolitan statistical area] census blocks with BDS demand, and those blocks contain 97% of all BDS connections and 99% of business establishments. And, according to the NPRM, ILECs’ in-region market share was already under 50%. Undoubtedly, competition is now even more pervasive, particularly given that cable companies are now prioritizing the BDS marketplace to grow their revenues in the face of more intense competition for their core video offerings." CLECs try to downplay the competition, "mostly by twisting the data to focus on areas where there is no BDS demand," but even an FCC consultant said "fiber-based competitive supply within at least half a mile generally has a material effect" on BDS prices, she said.

Former Rep. Rick Boucher, D-Va., told us CLECs can easily extend fiber to nearby buildings where there are business customers. "The BDS market is competitive. CLECs have built fiber rings to within very close distances of buildings," said Boucher, honorary chairman of the Internet Innovation Alliance. "There really is no justification, given the competitive nature of the market, to extend regulation to the ILECs' fiber-optic infrastructure, and it would be counterproductive to do so.”

A new report being filed shows the harm to broadband investment that would occur, particularly in rural areas, if the FCC expands price-cap regulation, said an ILEC ally. "While the FCC says that the price cap regulation would adjust provider rates to account for rural markets that the FCC perceives to be noncompetitive, new research shows that the FCC’s market data fails to accurately represent the market as it currently stands," said a release from Invest in Broadband for America: "The price cap regulation on providers would eliminate an estimated $1.4 billion revenue from the ILECs that service rural communities, which would discourage future investment by both ILECs and new providers looking to enter the market.”

Incompas and Verizon made a new proposal for regulating BDS. Their joint letter proposed details for establishing "benchmarks" to oversee Ethernet and other packet-based BDS services deemed noncompetitive. For a competitive market test, they proposed the FCC "define a facilities-based provider as one that has an actual customer or connection in a census block served by facilities owned, not leased, by that provider. In measuring the number of such providers needed to demonstrate that a census block is competitive, we propose the Commission should measure the number of providers in either the census block or any adjacent census block. We are continuing to discuss how many providers we think would be enough to deem a census block competitive, but agree that it should be more than two.”

“Compromise is never easy, but we have worked together diligently to forge a solution that is sound, balanced and simple," said Incompas CEO Chip Pickering in a release. "We urge the Commission to act with great speed, ending a decade long delay. This reform will accelerate investment in new fiber and 5G deployments. Unleashing the future of competition for business customers, schools, libraries and hospitals will bring lower prices, more choices and faster speeds for all Americans.”

Sprint said the accord is intended to "fix the long broken" BDS market. "We agree that the FCC must move quickly to correct the broken market for BDS, which has left 97% of this market controlled by one -- and sometimes two -- providers, and enable mobile networks that will be ready to power the 21st century economy," Sprint said in a release.

But AT&T's Van Wie said, "The FCC cannot ignore the weight of the evidence and impose an unjustified and burdensome BDS regulatory regime, even a so-called 'compromise' solution proposed by other BDS stakeholders, where the facts (and data) do not lead to the conclusion it expected to find. Instead, it must make a clear-eyed evaluation of the BDS marketplace with all the facts in hand. Doing so leads to only one possible conclusion -- the BDS market overall, and particularly for Ethernet services, is working and working well.”

Various others on both sides issued statements, including USTelecom and Free State Foundation arguing against new regulation and Competify and BT calling for new constraints. USTelecom also filed with the FCC a survey of small- and medium-sized businesses in the BDS market, which it said "shows business customers have been and are continuing to switch in very significant numbers among competing companies and technologies. The survey shows that competition is significantly broader than the commission may realize. In addition, the significant customer churn revealed by the survey demonstrates that the commission’s 2013 data does not reflect the current state of the market.”