Midsize Telcos Talking to Incompas/Verizon About BDS; Wheeler Call to CEOs Cited

Some telcos are talking to rivals about business data service regulation in an effort to seek a broader compromise, according to industry officials. “Members of the mid-size ILEC coalition have reached out to Incompas and Verizon and conversations continue,” emailed Mike Saperstein, Frontier Communications vice president-federal regulatory. The other members are CenturyLink, FairPoint Communications and Consolidated Communications, he said Friday.

Saperstein was responding to our query, which was sparked by comments from another industry official who told us FCC Chairman Tom Wheeler had called the CEOs of some incumbent telcos to encourage them to talk to CLECs and other competitors about whether they can find common ground on BDS. The FCC, Incompas, Verizon and some other BDS parties didn't comment.

Verizon and Incompas, which represents CLECs and other ILEC rivals, have proposed a BDS framework (see 1606270058). But ILECs say the proposals aren't a true compromise, given Verizon's increasing wireless and CLEC orientation (see 1608100045). CCMI consultant Andrew Regitsky, who has both ILEC and CLEC clients, said recently there had been talks that he thought might lead to a broader compromise (see 1608120063).

NCTA urged the FCC not to hit cable and other new competitors with BDS rate regulation. That market "generally is working well, with competitors of all types investing in new facilities to serve business customers and a clear record of declining prices," said a filing posted Friday in docket 16-143 on discussions with Wireline Bureau Chief Matt DelNero, an aide to FCC Chairman Tom Wheeler, General Counsel Howard Symons and others. "Any new regulation should be narrowly tailored to situations where it is clear that the benefits of regulation outweigh the significant costs ... [T]there is no basis whatsoever for imposing rate regulation on cable operators and other competitive providers who possess no market power with respect to any segment of the BDS marketplace."

NCTA knocked BDS rate regulation proposals, including the Verizon/Incompas framework. "A 'competitive test' of four providers with connections in a census block was nonsensical given that -- of those census blocks that have any BDS customers at all -- more than 50 percent have a single BDS customer and more than 80 percent have three or fewer customers," the cable group said. "Such an approach is not a meaningful competitive test, but simply a plea for the broadest possible regulation without regard to competition or costs. ... Beyond the flawed competitive tests included in these proposals, NCTA also expressed significant concern regarding the proposals to regulate Ethernet rates." The group said the "flawed proposals could not be salvaged by a temporary exemption for 'new entrants.'" Verizon and Incompas suggested that proposed "benchmarking" of Ethernet service not be applied to new entrants until the FCC reassesses market competition in about three years. NCTA also said many cable offerings to business customers are done "on a private carrier basis."

But Verizon said it agreed with the FCC that BDS offerings are telecom services, regardless of provider. "Cable providers sell Business Data Services the same way other providers sell these services, and ... the way they offer it is common carriage," said a Verizon filing on a meeting with an aide to Commissioner Jessica Rosenworcel. "Negotiating individualized contractual terms does not change a common-carriage service into private carriage. Nor can a provider simply assert a service is private carriage and make it so. Under both the statutory test and the common-law test, cable providers’ Business Data Services are common-carriage offerings."