Wheeler Seen Likely to Circulate BDS Draft Order Thursday, Plan Oct. 27 Vote

An FCC business data service draft order is still expected to circulate Thursday among commissioners and be placed on the preliminary agenda for the Oct. 27 meeting, various BDS stakeholders told us Wednesday. "I'm virtually certain we'll see it white copied [circulated] tomorrow. I think there are a lot of details in flux, but they want to get it on the agenda," said a cable representative. "That's the plan," agreed a former senior FCC official, who did caution: "The bureau has a draft ready to go, but I'm hearing it's a game-time decision" for Chairman Tom Wheeler. The agency didn't comment.

Much of the debate has focused on Incompas/Verizon joint proposals for a new framework that would create three tiers of BDS offerings based on their data speeds. The lowest tier (below 50 or 100 Mbps) would be deemed noncompetitive and subject to rate regulation; the highest tier (above 1 Gbps) would be deemed competitive and not subject to rate regulation; and the middle tier would be subject to commission review by census blocks using a competitive test (see 1606270058). They also backed making one-time and continuing price-cap rate cuts to account for productivity gains and "benchmarking" packet-based Ethernet services to legacy TDM-based rates, with new entrants receiving a reprieve of perhaps three years from the latter. Incumbent telcos, cable companies, competitive fiber providers and free-market advocates have voiced objections, while wireless providers (other than AT&T), CLECs and consumer advocates are supportive.

The FCC seems likely to include parts of the Incompas/Verizon plan, but not all, said one telecom industry official. A cable representative said the FCC paid "close attention" to Incompas/Verizon proposals, "but I don't think the draft item will do that," at least not without significant changes. For instance, the cable rep was doubtful the FCC would simply declare all BDS offerings below 50 Mbps are deemed noncompetitive and subject them to blanket regulation. On a competitive test, the cable rep would be surprised if the commission uses granular census blocks as the relevant market or a four-provider threshold to find a market competitive -- somewhat larger census tracts seemed more likely, while even three providers "would expand" regulation. "The big differences is between two and three" providers, said the cable rep. The FCC treatment of Ethernet service remains "unclear."

Industry and others continued to lobby in the docket 16-143 and post arguments online. Pro-regulatory filings were made by BT Americas (here), Incompas, Sprint and Windstream (here), consumer/public-interest groups (here) and others. Voicing concerns about regulatory proposals were NCTA (here), Frontier Communications (here), Charter Communications (here) and others.

The BDS regulatory impact for Frontier and Windstream would likely be "far less than valuations imply," wrote Raymond James analyst Frank Louthan to investors Wednesday. Frontier, Sprint and Windstream this week proposed modified transition mechanisms to delay BDS rate cuts (see 1610040078). And Anna-Maria Kovacs, a visiting senior policy scholar at the Georgetown Center for Business and Public Policy, issued a paper citing BDS regulation's "potential harm to competitive facilities deployment."