April 28, 2016 Last Updated 12:00 pm

FCC votes to reform business data services market, raising objections from cable providers, cheers from consumer groups

The Federal Communications Commission today voted to regulate rates on business broadband service for the first time, and with it continue a string of victories for the regulation side of the FCC panel, much to the chagrin of conservative members of the panel and the cable industry.

The vote, 3-2, comes as the cable industry looks to fight back against more aggressive regulations, while consumer groups applaud the now more activist approach of the FCC.

“I can say that we compete every day for that business, and it seems kind of counterintuitive that the FCC would want to impose regulations on a new entrant such as us, who’s bringing more competition to the business,” Comcast President Neil Smit said before the vote.

“Ending lock-up provisions will empower customers to break free and taste the freedom of competition,” said Chip Pickering, CEO of INCOMPAS. “A fluid marketplace where business consumers of all sizes, including schools, libraries, hospitals, and local and state governments can choose their broadband provider will incentivize the deployment of faster, next generation wired and wireless networks.”

“Chairman Wheeler has attempted to defend this proposal by suggesting that the marketplace for these services is a failure and that an entirely new set of technology-neutral rules is needed,” said the National Cable & Telecommunications Association in a blog post. “Such a theory cannot be reconciled with the fact that cable operators have entered the market and invested billions in new facilities to bring better services and lower prices to millions of businesses. That is the definition of an increasingly competitive marketplace, not a failing one.”

But not all businesses are against the new rules, especially those who face barriers to entry.

“The FCC is now poised to usher in a new competitive and sustainable business data services framework to the benefit of the entire broadband economy. We thank the FCC for its action today and look forward to continuing our work together to ensure that competition governs this critical input to innovation,” British Telecommunications plc said today in reaction to today’s FCC actions.

Here is the press release put out by the FCC today:

WASHINGTON, DC – April 28, 2016 – Today, the Federal Communications Commission jumpstarted the process of protecting and advancing competition in the $45 billion market for business data services, also known as special access.

Business data services are critical in the day-to-day life of consumers, business and industry, and are integral to the competitiveness of the U.S. economy as a whole in the information age. Users include banks and retailers connecting ATM machines and credit card readers, government and corporate users connecting branch offices and data centers, and mobile phone providers offloading calls and data from wireless networks – a need that will grow exponentially with the deployment of advanced 5G wireless service.

Yet data collected by the FCC shows that competition in this essential market is uneven, and that the FCC’s existing rules have failed to identify markets where competition is lacking, even as they have failed to identify competitive markets.

The item adopted by the Commission today seeks broad public comment on reforming and modernizing its rules based on four principles:

  • Competition is best, but where competition does not exist, market conditions must not be allowed to stifle the ability of business customers to innovate and compete\
  • Technological neutrality should be at the core of any new regulatory framework
  • Policies should remove barriers to the transition to new technologies Rules should be crafted to meet the needs of both today’s and tomorrow’s marketplace.

The item includes an Order resolving an investigation of existing special access tariffs filed by four major telecommunications companies, known as incumbent local exchange carriers or ILECs: AT&T, Verizon, CenturyLink and Frontier. The Order finds that certain terms and conditions of these tariffs were unjust and unreasonable, and had the effect of decreasing facilities-based competition and inhibiting the transition to new technologies. These companies will be required to withdraw the illegal terms of these tariffs and file new tariffs within 60 days of release of the Order.

A Further Notice of Proposed Rulemaking seeks to replace the existing, fragmented and outdated rules with a new technology-neutral framework that classifies markets as either non-competitive or as competitive. Where competition is lacking, the Further Notice asks about the specific rules necessary to advance it. The Further Notice also: Begins by surveying current marketplace conditions, including the location of current infrastructure and the data suggesting in which places and products and for which customers competition is more likely present and for which it is more likely to be not present. Based on this analysis, the Commission proposes to identify competitive markets as those in which material competitive effects are present;

  • Identifies and seeks comment on a set of de-regulatory measures in competitive markets, maintaining minimal oversight to ensure that the provision of telecommunications services is just and reasonable;
  • Seeks comment on requiring that companies be free from non-disclosure agreements that would prevent them from providing information to the Commission;
  • Identifies and seeks comment on a tailored set of rules to safeguard customers in non- competitive markets, including the use of price regulation and the prohibition of certain tying arrangements that harm competition;
  • Seeks comment on the appropriate treatment under this framework of the three types of contractual terms identified in the Tariff Investigation Order, as well as other contractual terms and conditions that have been subject to public comment;
  • Seeks comment on a proposal that tariffs should not be used in the future as part of the regulation of broadband data service in either competitive or non-competitive markets;
  • Seeks comment on a proposed future periodic data collection of a kind that will allow the Commission to update periodically its identification of competitive and non- competitive markets; and
  • In order that the new regulatory framework be applied in a technology-neutral manner, seeks comment on a proposal to eliminate the current exemption for certain Verizon services from the basic provisions of the Act governing just and reasonable offerings of telecommunications services.

The Further Notice emphasizes that the Commission intends to listen and to learn from the comments it receives before it reaches final decisions.

Action by the Commission April 28, 2016 by Tariff Investigation Order and a Further Notice of Proposed Rulemaking (FCC 16-54). Chairman Wheeler, Commissioners Clyburn and Rosenworcel approving. Commissioners Pai and O’Rielly
dissenting. Chairman Wheeler, Commissioners Clyburn, Rosenworcel, Pai and O’Rielly issuing separate statements.

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