Industry Divisions Still Clear in BDS Fight, Despite Incompas/Verizon Proposals

Battle lines remained fairly clear in the FCC business data service rulemaking, as dozens of replies were posted Tuesday and Wednesday in docket 16-143. Most wireless parties, CLECs, business customers and consumer advocates said the FCC needs to take new steps to regulate a BDS market often dominated by incumbent telcos with pricing power. ILECs and free-market advocates said new regulation would be unjustified and harmful in a business broadband market with robust and growing competition, particularly from cable companies, which recently updated their deployment data. Cable interests and others said BDS regulation shouldn't sweep in upstarts.

Incompas and Verizon joint proposals have blurred the lines somewhat, as they traditionally have been on opposite sides, but incumbent telcos say Verizon is increasingly wireless/CLEC-oriented. Incompas/Verizon proposed Tuesday that new entrants wouldn't be subject to "benchmark" regulatory oversight of Ethernet and other packet-based services until the FCC reassesses market competition in about three years.

Sprint, the Competitive Carriers Association and others sought regulation to address market problems. "The most comprehensive record in the Commission’s history is clear," Sprint said: BDS competition is insufficient and the FCC "must act now to ensure BDS rates, terms, and conditions are just, reasonable, and non-discriminatory." It said, "Carriers, consumer advocates, competitive carriers, public interest groups, large enterprises, and rural providers agree." Sprint said that data and industry experience "demonstrate that prices are exorbitant, and that [ILECs] are restraining competition," and that the supplemental cable data on their hybrid fiber-coaxial facilities don't change the conclusions.

Level 3 said the record showed a lack of competition in most BDS markets, and "best-efforts services" of cable and others shouldn't be counted. There's "no meaningful competition" for low-speed services, limited competition for "mid-bandwidth services" and multilocation customers lack competitive choices, Level 3 said. It said the FCC should develop a competitive market test for certain BDS offerings that requires at least four competitors in a market no bigger than a census block for that area to be deemed competitive, and use "price caps and tariffs to constrain leading competitors' ability to exercise market power." TDS Metrocom agreed four or more competitors should be required under the test. Windstream said it agreed the FCC should deem BDS offerings at or below 100 Mbps as "noncompetitive" and subject to regulation. The National Association of State Utility Consumer Advocates, Public Knowledge, Consumer Federation of America and New Networks Institute and the Ad Hoc Telecommunications Users Committee backed regulatory efforts.

AT&T said competition is "robust and nearly ubiquitous," though CLECs "pretend it does not exist" and urge the FCC to impose "intrusive, investment-killing regulation" on industry. "They submit proposals cynically described as 'compromise' proposals that reflect nothing more than minor horse trading among those whose interests are aligned. It is time to reset the conversation and get back to data-driven decision making," AT&T said. It said data show that as of 2013, competitors deployed facilities "in more than 95 percent of census blocks with BDS demand" in metropolitan statistical areas, and "those census blocks cover 97 percent of the BDS connections and 99 percent of business establishments in MSAs." That and other supportive data should carry the day, it said.

Proposals to cut BDS rates are "misguided and flawed," said CenturyLink and midsize telcos. "Claims by regulatory proponents that BDS rates are too high ignore record evidence of intense BDS competition and rapidly falling prices," said CenturyLink and Consolidated Communications, FairPoint Communications and Frontier Communications. "Competitive pressure from cable-provided BDS services is undeniable and directly relevant." They said the Incompas/Verizon proposal "is not a compromise and does not offer a viable road map" for the proceeding. "The commission should not regulate rates for service packages involving both ‘competitive’ and ‘non-competitive’ markets," they added. USTelecom and a few other ILEC interests also commented.

NCTA said there's no basis for regulating rates charged by cable operators and other BDS competitive providers. "Competitive providers have been investing billions of dollars to extend facilities to business customers all over the country and the record is clear that these investments, and the additional competitive options they offer, are having the effect of reducing the prices that customers pay for these services," the cable group said. "The Commission at this point has no record upon which it could rationally impose rate regulation on any provider lacking market power, and the record is compelling that cable companies lack any semblance of market power." The American Cable Association, Charter Communications, Comcast, Cox Communications and Mediacom filed supportive comments. The Internet Innovation Alliance, Free State Foundation and Tech Knowledge voiced resistance to new industry regulation in general.