Critics Say FCC 'Unreasonably Deregulated' BDS Rates; Citizens, CenturyLink Target 'X-Factor'

Petitioners challenged an FCC business data service order from different directions in opening briefs to the 8th U.S. Circuit Court of Appeals made available Wednesday and Thursday. The order (see 1704200020) should be vacated because it "unreasonably deregulated" incumbent telco BDS rates, said Access Point, Ad Hoc Telecommunications Users Committee, Alpheus Communications, BT Americas, Incompas, Granite Telecommunications, New Horizon Communications, Sprint, Windstream and XChange Telecom in Citizens Telecommunications of Minnesota v. FCC, No. 17-2296. They said price-cap ILECs -- including AT&T, CenturyLink and Verizon -- "built extensive networks as franchised monopolists, and dominate the [BDS] market because their local facilities reach virtually every business" in their regions. "It is often economically infeasible for BDS providers seeking to compete with the ILECs to deploy local facilities, so they must purchase them from incumbents," said the brief of the BDS competitors and business customers. "Similarly, carriers seeking to provide competitive voice services must buy incumbent facilities, particularly to serve businesses with multiple locations." But Citizens and CenturyLink asked the 8th Circuit to vacate a 2 percent "X-factor" the FCC applied to reduce ILEC legacy BDS rates in areas remaining under regulation to account for productivity gains. "The FCC chose a 2.0% X-factor that significantly overstated efficiencies in the provision of rate-regulated BDS offerings and ignored evidence of slower productivity growth among such services relative to others," said the ILECs' brief (in Pacer). "It also failed to account for evidence of declining utilization of these services, which has caused the per-unit cost of providing these services to remain steady or even increase. The resulting X-factor forces excessive annual rate reductions not supported by the record." Citizens and CenturyLink asked for 20 minutes of oral argument. The BDS competitors and business customers suggested the court divide 30 minutes of oral argument between themselves and the commission, but not give time to Citizens and CenturyLink, which "advance the frivolous contention that the FCC should have completely deregulated" BDS rates.