FCC Kicks Off Process to Revamp Business Broadband Rules

Keep up with the latest developments and legal issues in the telecommunications and emerging technology sectors, with exclusive access to a comprehensive collection of telecommunications law news,...

By Lydia Beyoud

April 28 — The Federal Communications Commission kicked off a rulemaking April 28 that could pit Verizon Communications Inc. against other large wireline telecom carriers and the cable industry in an effort to restructure how the FCC regulates the $45 billion business data market.

The commission voted 3-2 along party lines to approve a further notice of proposed rulemaking (FNPRM) that the agency said would “level the playing field” for large and small telecom providers that lease bulk data connection services—also known as special access—to resell to businesses. Those services are used to connect cell sites to backbone networks—backhaul—by the wireless industry and to support high-speed broadband services for banks, retailers, government and corporate users, schools and hospitals.

Replacing the existing, “fragmented” regulatory structure for business data services with a technology-neutral framework based on an evaluation of competition in a market is critical to encouraging infrastructure investment needed to support 5G network development, FCC Chairman Tom Wheeler said.

“There is a reason why all the major wireless carriers—save one—support this item,” said Wheeler, referring to AT&T Inc.'s opposition to the proposal. “Because it’s essential to wireless competition. Competition today, in 5G innovation, and competition tomorrow.”

Opinions vary greatly on whether that goal can be achieved under the FCC's proposed regulatory framework.

The goal of the FNPRM is to regulate all players in the special access market under the legal framework and basic protections of Sections 201 and 202 of the Communications Act of 1934, related to rate regulations, said Matthew DelNero, chief of the Wireline Competition Bureau. The questions raised in the proceeding concern how to apply that framework, he said.

The proposal doesn't determine that all providers offering services in a market determined to be noncompetitive should be subject to price regulation, DelNero said. Rather, it asks how to determine which entities should be subject to price regulation in a noncompetitive market, he said.

Competitive carriers, represented by the trade group INCOMPAS, and Verizon announced a deal April 7 on the issue of rate regulation in the business data market. The allies echoed their support following the vote on the item, with Verizon stating that it supports “a balanced framework that would result in a consistent approach to all competitors.”

But with the FCC's proposal to turn its focus to who holds power within a given market—and therefore seeking comments about who should be regulated in any noncompetitive markets—cable providers, including some like Comcast Corp. that are increasingly interested in offering wireless services, face the prospect of special access rate regulation for the first time.

The National Cable and Telecommunications Association (NCTA) said their entrance into the business data services market in recent years has improved services and lowered prices. The group said it was sure the proceeding would expose “the obvious harm to investment” created by regulating rates.

Comcast, NCTA's largest member, similarly said the FCC's plan would result in less competition in a market it said is already competitive. “This rulemaking, like a bolt out of the blue, would lay waste to that longstanding and eminently sensible regulatory framework and would brush aside basic tenets of antitrust law,” Comcast's Executive Vice President David L. Cohen said in a statement.

Wireless infrastructure investment could feel the brunt of a lack of competition, Cohen said: “In the wireless arena, where explosive data growth and the advent of 5G will require a huge investment in fiber connections to carry the data from new cell sites to the Internet, the chilling effect of this regulatory proposal will be felt the most.”

Republican Commissioner Michael O'Rielly echoed those sentiments in his dissent from the item. “One of the best ways to ensure that providers invest to meet the growing demand for backhaul is to free them from legacy rules that hamstring competition. We cannot regulate our way to deployment.” He warned the item would ultimately be challenged and overturned by the courts.

Democratic Commissioner Mignon Clyburn expressed concern with the complexity of the item and how feasible it would be for the FCC to administer it for both sides of the business data services market. “From my perspective, all options are on the table and I hope that the ultimate result will be a framework, as mentioned earlier, that is simple, targeted and easy to administer,” Clyburn said.

Tariff Investigation Order

Accompanying the FNPRM is an order resolving the FCC's investigation into clauses used by AT&T, CenturyLink Inc., Frontier Communications Inc. and Verizon in contracts with competitive providers that lease facilities from them to offer special access services.

The order would prohibit the use of tariffs deemed unjust and unreasonably under Sec. 201(b) of the Communications Act of 1934. Those include “all or nothing” provisions that require customers to make all purchases from a single tariff plan, as well as excessive shortfall fees if traffic falls below agreed-upon thresholds and early termination penalties.

The companies would have to withdraw the tariff provisions and file new ones within 60 days of the release of the order.

O'Rielly castigated the commission for wading into contractual issues he said were better left resolved between the parties themselves. “These are agreements between sophisticated and well-represented buyers and sellers” who in turn service large banks, health care facilities and big box retailers.

“The provisions are clear and purchasers entered into them with full knowledge of the consequences for not fulfilling the terms of the deal,” O'Rielly said. He added that the FCC was giving an advantage to one side of the deals in unwinding the tariff terms.

Sprint Corp. said the FCC's proposal “recognized what competitive carriers have long experienced, that large incumbents exercise overwhelming market power and impose unreasonable rates, terms and conditions over a critical part of our nation's networks.”

INCOMPAS, which had been advocating for the FCC to review the contractual terms, said the prohibition on lock-up provisions in contracts would lead to “a fluid marketplace where business consumers of all sizes, including schools, libraries, hospitals, and local and state governments can choose their broadband provider.”

3.5 GHz Refinements

The FCC also approved by a rare 5-0 vote an order on reconsideration and a second report and order to finalize rules for the three-tiered spectrum sharing regime between licensed and unlicensed spectrum established for the 3.5 gigahertz (GHz) band .

The FCC said the items would expand access to priority access licenses (PALs)—the second tier of spectrum access priority— in rural areas, make it easier for satellite systems to deal with interference issues, and allow for higher power transmissions in non-rural areas by certain satellite users. Many of those satellite users were grandfathered into the plan as first-tier priority access users for the band, along with the Department of Defense.

The items also address how to promote a robust secondary market for PALs in the 3.5 GHz band.

“These changes may seem small, but the impact of this band is bound to be big,” said Democratic Commissioner Jessica Rosenworcel, a major proponent of spectrum sharing.

Republican Commissioner Ajit Pai, who concurred in part and approved in part, said the rule to make a PAL available in rural areas even when there is only a single provider should encourage the deployment of wireless services and new technologies to rural America.

CTIA, the trade group representing wireless carriers, said the item would help improve certain technical aspects of the service rules, but also criticized the agency for failing to provide “appropriate incentives and protections for licensed users.” The group said it did not recommend expanding the spectrum sharing experiment to other bands until after the successful auction and operation of all three tiers of 3.5 GHz spectrum access.

O'Rielly, who dissented in part and approved in part, said he would oppose the extension of the spectrum sharing framework to cover millimeter wave bands. The commission is currently exploring whether to expand sharing to include spectrum bands above 24 GHz.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com

To contact the editor responsible for this story: Tim McElgunn at tmcelgunn@bna.com

For More Information

Text of an FCC news release on special access is at https://apps.fcc.gov/edocs_public/attachmatch/DOC-339101A1.pdf.

Text of an FCC news release on the 3.5 GHz band is at https://apps.fcc.gov/edocs_public/attachmatch/DOC-339104A1.pdf.

Request Tech & Telecom on Bloomberg Law