FCC Appears Poised to Act on Deregulatory BDS Order; Transition Seen in Play

An FCC business data service order remained on the agenda for Thursday's meeting of commissioners, despite continued criticism and calls for delay from parties saying BDS deregulation would hurt competition and consumers. "They seem intent on moving forward," said a competitive industry official Wednesday. "That's my sense," agreed an informed source, who said "the big open issue" is a potential transition period to delay the effective date of new BDS rules.

Critics seek a transition period of at least three years to give BDS providers and customers time to adapt, including through deployment of new high-speed connections to business locations, communications hubs and cellsites. FCC Chairman Ajit Pai "has said building new networks is expensive and challenging" and "has proposed an important and thoughtful" agenda to "streamline deployment and eliminate regulations and local barriers," said an Incompas "fact sheet" that listed numerous objections to a draft order. "But competitive providers are some of the most prolific builders currently in the space. Why cut off wholesale access they use to compete BEFORE the deployment agenda remedies are in place. Without a transition period, small business customers will see price hikes, cut off notices, and service disruptions."

A transition "should be an easy ask," said the competitive industry official. "My understanding is discussions are going on." The push for delayed implementation received the backing of three congressional Republicans from Arkansas -- Sens. John Boozman and Tom Cotton and Rep. French Hill -- who called for a "reasonable transition" in a letter this week to Pai (see 1704180041). The offices of the FCC's three commissioners didn't comment Wednesday.

AT&T hailed the FCC's proposals, which would align "regulation of legacy BDS services (DS1s and DS3s) with economic realities," said a blog post Tuesday by Caroline Van Wie, assistant vice president. "The Commission’s order imposes a light-touch regulatory regime on all legacy transport services (where competition for these services is pervasive), while implementing a fact-based Competitive Market Test for legacy BDS last mile connections. Applying this sensible market test proposed by the FCC will ensure that the BDS marketplace will continue to flourish in areas where competition has taken hold and that existing controls remain in place where the Commission determines that competition is still needed. These commonsense reforms are grounded in the FCC’s massive data collection and the voluminous record. And the time to act is long overdue." Another AT&T blog post Wednesday lauded FCC proposals to promote broadband infrastructure deployment that are on the agenda Thursday.

USTelecom called attention to the FCC's proposal for new BDS detariffing. The FCC is poised to expand on previous relief "by ending tariffing and other legacy pricing regulation in areas with significant BDS competition," said a Wednesday blog post USTelecom's Diane Holland. "Monopoly-era BDS tariffing requirements no longer make sense except for a few legacy services still subject to price caps. De-tariffing is a significant step toward modernization that will bring more sustainable BDS competition, and more investment and BDS deployment."

But the European Union voiced alarm about the FCC's recent findings that BDS competition is strong and growing. The EU "is concerned that this sudden change of course, followed by the rapid action that is foreseen in the draft Report and Order may be harmful to consumers and competition, and that it will further aggravate the imbalance in BDS regulatory practice that already exists between the US and the EU and other nations," said a letter in docket 05-25 by David O'Sullivan, EU ambassador to the U.S. "The imbalance skews important markets, such as global B2B data services, where both EU and US players hold significant interests, in favor of US players globally." He also said the FCC's current course could threaten U.S. compliance with World Trade Organization telecom "norms." He urged the FCC to "re-examine" its draft conclusions or at least allow for an appropriate transition.

Public Knowledge urged the FCC to follow general GOP views in favor of competition and against monopolies. "The simplest way to provide affordable access to the basic needs of American families is through a competitive free market," said Chris Lewis, PK vice president in a release that cited a video. "House Speaker Paul Ryan [R-Wis.] makes this point about healthcare and it is definitely true about the basic communications network of the 21st century: high-speed broadband. As [Senior Adviser to the President] Jared Kushner says, ‘high-speed fiber with multiple carriers’ can lower costs and give American families more choices. Access to high-speed broadband also brings American family [sic] a connection to quality healthcare, educational opportunities, jobs and entrepreneurship in a global market, and emergency communications."

Competitors disputed an ILEC reference to CLECs having 51 percent of BDS connection revenue in 2013, said Incompas General Counsel Angie Kronenberg, who said Sprint and Windstream last week rebutted that point at the FCC. "The Draft Order states that competitive providers 'earned $23 billion of the $45 billion in business data services revenue in 2013' as evidence of a 'dynamic' marketplace," said their filing. "But this statement is misleading, at best. As the Commission’s economics consultant, Dr. Marc Rysman, explicitly stated in his analysis of the data collection, the competitive providers’ share of revenue includes competitors’ reselling of ILEC special access services and unbundled network elements together with competitors’ own services, and thus 'overstate[s] the competitive presence of' non-ILEC providers. Indeed, Dr. Rysman noted that 'it is probable that a substantial share of [competitive provider] revenue over circuit-based lines actually represents lines leased from ILECs, since facilities-based entry from [competitive providers] tends to focus on packet-based technology.' The Commission fails to explain why these facts do not render its use of these figures incorrect."