Frontier, Sprint, Windstream Propose BDS Rate Transitions as Vote May Be Oct. 27

Frontier, Sprint and Windstream proposed two modified FCC transition mechanisms for phasing in proposed price-cap reductions of legacy "TDM-based" business data services. The rivals said they had divergent interests but believed in "forging industry consensus" to help the commission revise its BDS framework. The FCC is considering placing a BDS draft order on its preliminary agenda Thursday for its Oct. 27 meeting, informed sources continue to tell us.

The three companies said Incompas and Verizon proposed the FCC implement a one-time adjustment to price-cap levels over a two-year period, while applying a revised annual "X-factor" mechanism to account for productivity gains over time. "In light of the buying and purchasing power that the largest ILECs and their affiliates have in the BDS marketplace, and the uniquely large impact that abrupt regulatory changes would have on the business operations of smaller ILECs, Frontier, Sprint, and Windstream have agreed that these proposed transition-related rules should function as a 'default' to which certain modifications to the transition mechanism are warranted," said a filing by the three companies posted Tuesday in docket 16-143. The default would apply to price-cap ILECs that don't qualify for two modified transition mechanisms. "While Frontier, Sprint, and Windstream continue to discuss all elements of the framework for BDS reform, including those not addressed in this submission, all three parties agree that a reduction in rates for price cap TDM services should be based on the modified transition mechanisms," they wrote.

Describing a first modified segue, the three companies said: "The Commission should adopt a more moderate transition for any ILEC that's not the largest price cap ILEC in the state, but serves (at above a de minimis level) a top 100 MSA [Metropolitan Statistical Area]. For the purpose of determining eligibility for this transition, an ILEC serves a top 100 MSA above a de minimis level if it provides at least 25 percent of the broadband connections provided by all ILECs in the MSA as reported in its Form 477. Though the parties have not agreed on what one-time reduction the Commission should apply in the default transition, they have agreed that the Commission should implement a one-time adjustment over a three-year period for this modified transition; this one-time adjustment should be lower than the default one-time adjustment. In addition, the Commission should defer application of this modified one-time adjustment and its revised X-factor for a period of one year."

The companies proposed the FCC "adopt a second modification for any price cap ILEC when it does not serve any top 100 MSA in the state above a de minimis level or operates in a non-contiguous area. For these areas, the Commission would refrain from implementing a one-time adjustment, and defer application of the new X-factor for a period of one year."

Sprint said the proposal builds on the Incompas/Verizon plan. "Recognizing the unique needs of smaller incumbent carriers serving rural America, as well as the need for BDS reform, these companies agreed to a modified implementation plan that would allow rural carriers greater flexibility in making the changes needed to ensure competitive pricing for these critical inputs to broadband services," said a Sprint statement. "While the parties did not agree on all aspects of reform, today’s announcement will provide the FCC with a path forward -- one that is capable of opening the BDS marketplace to competition. This agreement marks a significant step towards providing needed rate relief, benefiting the deployment of next generation network technology."

Numerous parties continued to lobby the FCC and make filings in the BDS docket, including BT Americas, whose executives met with Chairman Tom Wheeler and staffers. "BT discussed the importance of regulating bottleneck TDM and Ethernet-based BDS not just to promote fair competition and a level playing field but also because such action would be important and beneficial for investment and innovation," said a filing.