Frontier Says Uniform BDS Regulation Creates Added Risks for Wireline Telcos

Frontier Communications said wireline telcos could be harmed disproportionately if potential business data service regulation doesn't account for differences among carriers. A Frontier executive and a senior commission staffer agreed further industry talks on BDS proposals are desirable, but not much time remains for a broad agreement if commissioners act at their Oct. 27 meeting, as some expect (see 1609190064). Frontier, NCTA and others made new filings in docket 16-143 opposing BDS regulation proposals.

"Frontier urged the Commission to fully consider the disparate impacts that would occur if the Commission instituted a uniform rate reduction for BDS services across providers with differing business models and revenue streams, particularly those ILECs that lack wireless or significant CLEC operations," said a filing posted Tuesday on a phone call Thursday between Executive Vice President Kathleen Abernathy and Wireline Bureau Chief Matt DelNero. "Frontier described the economic impact that the BDS proposals could potentially have on the company, and ultimately may have on its customers and employees. The parties agreed that industry discussions on BDS proposals among stakeholders remain appropriate."

Incompas and Verizon made joint proposals for a BDS regulatory framework, but other ILECs said they aren't a true compromise because the company's increasing wireless and CLEC orientation brought its economic interests more in line with Incompas members. DelNero said recently FCC Chairman Tom Wheeler wants industry rivals to reach as much agreement as possible to narrow differences (see 1609210056). Frontier and some other industry parties didn't comment Tuesday.

The tentative agenda for the Oct. 27 meeting is due Oct. 6. “All indications at this point are that the BDS item will be on the October meeting agenda. It could slip, but that seems unlikely,” Colleen Boothby, counsel for the Ad Hoc Telecommunications Users Committee, told us. The FCC didn't comment.

NCTA disputed Level 3 attempts to discredit findings submitted by two economists on the group's behalf: Michael Katz, a professor at the University of California, Berkeley, and Bryan Keating, executive vice president of Compass Lexecon. NCTA said Katz and Keating "demonstrated serious flaws in the regulatory proposals advanced by Level 3 and others," and nothing in a Sept. 9 Level 3 letter casts doubt on their analysis. "Level 3 attempts to rebut several specific conclusions reached by Drs. Katz and Keating, but it never addresses the central finding of their declaration, which is that the regulatory proponents have ignored the costs of regulation and therefore have proposed a framework that would lead to unwarranted and counterproductive regulation," said an NCTA filing. "As Drs. Katz and Keating explain, predicating regulation solely on regression analyses that purport to show lower prices with more competitors (and hence market power) is 'fundamentally unsound' because it fails to consider 'the inevitable imperfections and costs of regulation.'”

Lumos Networks objected to potential regulation based on BDS benchmark rates, in a meeting with Office of Strategic Planning Chief Paul de Sa and Wireline Bureau staffers. "Lumos explained in detail the obstacles benchmark pricing would create and how such regulation of Lumos’ pricing would impede its ability to invest in its fiber network and continue bringing competitive fiber deployment to underserved and rural markets in parts of Virginia, West Virginia and other states," said a filing. "Lumos discussed the challenges in deploying fiber solutions for health care and social services providers that need customized routing to ensure their networks remain resilient. Lumos emphasized that it might not be able to afford to build such solutions if it had to comply with price benchmarks based on ILEC rates for point to point circuits that share few, if any, of the characteristics of the networks that Lumos deploys to serve customers."

A Communications Workers of America official criticized proposed BDS rate cuts, in a meeting with a Wheeler aide. "The FCC’s BDS proposal would effectively require unionized incumbent carriers to subsidize the input costs of low-wage, non-union competitive providers and wireless carriers, with negative consequences for workers’ living standards and jobs in the telecommunications sector," said a filing by Debbie Goldman, telecom policy director, which noted previous CWA concerns (see 1609210053 and 1609140057). But TeleQuality Communications, a competitive provider serving healthcare customers, backed "FCC action" and endorsed the Incompas/Verizon proposals, which include BDS rate reductions.