FCC Issues Pared-Back Business Data Rules Proposal

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By Kyle Daly

Oct. 7 — The Federal Communications Commission Oct. 7 significantly narrowed an effort to overhaul regulations for the business broadband market, opting to focus mainly on new price caps and a light-touch approach to newer technologies.

FCC Chairman Tom Wheeler is proposing the rules for the services “to take necessary and overdue steps to reform a long-broken regulatory regime,” according to an agency fact sheet.

Telecom and cable companies sell business data services (BDS) to banks, retailers, government and corporate users, schools and hospitals that need to move data, as well as to other service providers to connect cell sites to backbone networks. Wheeler is trying to foster greater competition in the market, composed of a mix of major providers such as AT&T and smaller providers that hook into their larger counterparts' networks for a fee, amid resistance by some of those providers. Wheeler has narrowed his focus to making changes to price caps, but it wasn't immediately clear whether a majority of the commission will back his new approach.

Under the rules proposal outlined Oct. 7, the agency would adjust price caps restricting maximum prices for specific services and establish a process for lowering those caps over time to account for more efficient, lower-cost networks. The staggered approach to price reduction is designed to simulate a competitive market in which prices are driven down, rather than going up each year, as has been the trend for BDS in recent years.

The proposal also would apply a light-touch regulatory approach to “packet-based BDS” that, the agency says, will promote investment by cable operators and competitive local exchange carriers challenging traditional phone companies for business services customers. Packet-based services are based on newer technology and offer much faster broadband pipes than legacy BDS offerings, typically starting at a minimum of 45 megabits-per-second (Mbps).

The FCC opted not to apply price caps or any substantial new regulations to packet-based services under the new proposal because it found evidence of emerging competition in the market, in contrast to its findings on legacy BDS, according to the fact sheet. Instead of price caps, the FCC will set up a complaint system through which packet-based service clients can bring unfair pricing or terms to the FCC's attention. The agency does intend to marry the new rules with a request for comment on whether it should some day consider bringing price caps and other regulations to packet-based BDS.

The FCC based its conclusion of entrenched market power and limited competition in the legacy market on a data survey finding that monopolies or duopolies controlled the vast majority of markets around the country. Critics of BDS regulation have disputed the agency's interpretation of that data (2016 TLN 9, 9/1/16).

The proposal significantly pares back an earlier proposal that was billed as a total overhaul of BDS regulations. The FCC in April voted 3-2 along party lines to move forward a plan that would have instituted price caps but also would have set up a comprehensive system that would have evaluated competition market by market and established steps for the FCC to step in any time it found an insufficiently competitive BDS market (2016 TLN 5, 4/5/16).

Squeezing In a Vote

Wheeler circulated the proposed rules to other commissioners, an FCC official told Bloomberg BNA, in time for the item to make it onto the FCC's tentative agenda for its Oct. 27 open meeting. The agency released a meeting agenda Oct. 6 that didn't include the business data proposal. That could mean a majority of the five commissioners still have concerns they want addressed before the rules go up for a vote, though it could also simply be a matter of staff bandwidth. The commissioners and their staffs are focused primarily on a landmark broadband privacy proposal scheduled for an Oct. 27 vote (21 ECLR 40, 10/12/16), the official said. Even so, the FCC can still add the business data services proposal to its Oct. 27 meeting agenda.

Wheeler has said he intends to get a vote on business data services rules by the end of the year. If it doesn't end up slotted into the Oct. 27 meeting, the agency could vote privately on the rules as soon as it has the support of three commissioners. The FCC rarely takes that step on controversial or closely watched issues, however. Otherwise, Wheeler will have to aim for a business data service vote at the commission's November or December meetings.

Plan Draws Fire

In trying to strike a middle ground between top business data services providers and allies who wanted no further regulations on one side, and smaller providers and other groups counting on more aggressive regulatory intervention on the other, Wheeler seems to gain few plaudits from either side.

AT&T senior vice president Bob Quinn called the proposal “little more than a wealth transfer” to smaller companies that will chill broadband investment and kill jobs, while Communications Workers of America President Chris Shelton said the price cuts will “have a devastating effect on the investment necessary for broadband expansion.” The Internet Innovation Alliance, which represents AT&T and a range of other companies and groups including the American Conservative Union and the National Black Chamber of Commerce, said the move amounted to re-regulation that will disadvantage top providers.

Walter McCormick, president of USTelecom, a telecommunications industry trade group, hailed the decision to take a light touch on packet-based services but urged the FCC to rework the proposal to tailor any rate cuts by market rather than instituting across-the-board caps.

On the other hand, John Windhausen, president of the Schools, Health & Libraries Broadband Coalition, which advocates for expanded broadband availability in the relevant sectors, said the plan “threatens to cut off the future of education” by not doing more to rein in BDS prices, namely institute price caps on all services, including packet-based business connections.

—With assistance from Tim McElgunn

To contact the reporter on this story: Kyle Daly in Washington at kdaly@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com

For More Information

The FCC's BDS fact sheet is available at: http://src.bna.com/je6

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