Press Releases

IIA Encourages FCC to Recognize Competitive Business Data Services Market and Questions FCC’s Plan to Price Regulate

Says price regulation will inhibit next generation 5G broadband deployment and negatively impact broadband deployment in Rural America

WASHINGTON, DC – August 9, 2016 – In light of the “special access” data collected by the Federal Communications Commission (FCC), the Internet Innovation Alliance (IIA) today encouraged the Commission to recognize that the business data services (BDS) – or special access – market is increasingly competitive. In its Reply Comments in the FCC’s Business Data Services Proceeding, IIA emphasized that there is no justification for intrusive, ex ante regulation of the BDS market and made clear that regulation of the BDS market is in no way necessary to achieve the deployment of 5G technology. 

“The best economic regulation proceeds from a firm foundation of data,” commented Bruce Mehlman, founding co-chairman of the IIA. “The Commission’s existing data set conclusively shows that the nation’s BDS market is very competitive and growing more so every day.” 

Mehlman added, “Return to price regulation in broadband markets will discourage critically-needed investments in 5G mobile broadband networks nationwide.”

PRICE REGULATION OF LEGACY AND ETHERNET BUSINESS DATA SERVICES WILL DETER THE INVESTMENT NECESSARY FOR UBIQUITOUS HIGH-SPEED BROADBAND DEPLOYMENT

Only the private sector can provide investment necessary for BDS deployment. As the FCC previously recognized, $350 billion of investment is needed to meet the Nation’s high-speed broadband needs. Investment capital at that level can come only from the private sector, not from government. Similarly, private investors will invest only where they can reasonably envision a positive return on their investment. Thus, to meet the growing demand for ubiquitous nationwide high-speed broadband deployment – including the BDS market – government should advance only those policies that actively promote and encourage, rather than deter, private investment.

Investment has promoted and will continue to promote real competition in the BDS market. IIA’s studies affirm how the business broadband market has evolved (and continues to evolve) far past the point at which ongoing regulation of this market can be justified. By the end of 2015, wireline competitors, including cable and CLECs, had roughly the same number of business broadband lines as the Incumbent Local Exchange Carriers (ILECs). CLECs seek to continue to rely on incumbents’ networks where they can, rather than employing a business strategy based on true facilities-based investment and competition.

Further Competitive Local Exchange Carrier (CLEC) investment would be easy but continues to lag. Facilities-based competition is accessible for the vast majority of buildings for which there is BDS demand. The FCC’s record highlights how 25% of buildings connected only to ILEC services with demand for BDS services are 17 feet away from the nearest competitive provider’s fiber network, 50% are 88 feet away, and 75% are within 456 feet. If CLEC providers truly wished to serve these buildings, they would have few difficulties building out nearby fiber to them. CLECs have made a business decision to ignore direct facilities-based competition and rely on other carriers’ capital investments to reach customers, rather than to adopt policies that will promote investment and thus benefit the economy as a whole.

REGULATION OF BDS IS IN NO WAY NECESSARY FOR 5G DEPLOYMENT AND WILL IN FACT HARM AND SLOW 5G DEPLOYMENT

The rapid deployment of fiber to date has occurred without the heavy hand of regulation, and there is no reason to doubt that it will continue. The robust fiber build-out to the nation’s existing macro cell towers to facilitate the transition to 4G wireless networks is an excellent barometer of how the market responds to business opportunities presented in the wireless backhaul market. 

THE NASCENT DEVELOPMENT OF 5G TECHNOLOGY ARGUES AGAINST THE COMMISSION’S JUSTIFICATION FOR BDS REGULATION

The new 5G networks will transmit data at Gigabit speeds and will, by definition, not be able to use TDM-based megabit speeds. Thus, the regulation of legacy networks is irrelevant to future 5G deployment. The Commission simply cannot use the market-driven transition to 5G networks as justification for ex ante regulation, which would seem to steer the direction of 5G evolution rather than letting the technology evolve and markets along with it.

INVESTMENT AND DEPLOYMENT OF BROADBAND NETWORKS AND SERVICES IN RURAL AMERICA WILL SUFFER UNDER THE FCC’S PROPOSED BDS PRICE REGULATION

High-speed broadband is deployed most quickly when investors have incentives to invest in these deployments. A system that imposes price regulation and lowers profit margins for investors will not provide the necessary incentives for rapid deployment of 5G technology (or even 4G technology) to rural America. 

Rick Boucher, a representative for 28 years of Virginia’s most rural and mountainous congressional district who now serves as honorary chairman of the IIA, commented, “The Commission cannot simply overlook the reality of the BDS market and remain true to its and the Administration’s commitment that all Americans, and all American businesses, including rural hospitals and educational institutions that are the lifeblood of many local communities, deserve excellent and fast broadband services.”

To read the Internet Innovation Alliance’s Reply Comments in full, visit here.