A lot has changed since 1996. But one thing that hasn’t changed are so-called “Special Access” or Business Data Services (BDS) regulations. Below is a collection of IIA’s work on Special Access/BDSs and how the FCC should take a smart and sensible approach when it comes to regulations.
[T]ake business data services, where the FCC is actively considering price regulation on incumbent carriers and mandated access to the incumbents’ infrastructure to benefit a favored few companies in markets that are characterized by a high level of new competitive entry — especially from those cable companies that the PPI cites as major investors.
[I]f the FCC is going to say with a straight face that it is willing to impose price regulation even in situations with dozens of competitors in a market, what does that say about its attitude or potential attitude toward other parts of the industry? What company is safe from fear that it, too, could become subject to price regulation and decide, therefore, that investment and innovation in the U.S. telecommunication market is just not worth it?
The chairman of the FCC has now circulated a proposed BDS order that would impose mandatory price cuts on legacy facilities, the copper-based TDM lines primarily operated by the telco incumbents. His order also imposes price oversight on the providers of Ethernet services pursuant to a rate reasonableness standard. These proposals make it extraordinarily difficult for either the incumbents or the new Ethernet-based competitors to predict their return on investment.
Trade association INCOMPAS, which represents competitive local exchange carriers (CLECs), and Verizon have been working together to “negotiate” a deal with the Federal Communications Commission. Although the terms may make perfect sense for them, they’re bad for the actual deployment and adoption of broadband infrastructure and, namely, the future of business data services (BDS).
Some are currently trying to sell this as a “compromise” plan — it’s not; a compromise typically requires there to be opposite sides at the table. Verizon is in the midst of transformation where it has sold off much of its wired telephone footprint across the nation in recent years and, as a result, now finds itself more and more a buyer of BDS in much of the country.
Simple economics suggests that the way to promote the most rapid deployment of the fastest business data services to the enterprises that need them is to rely on competition and the market forces that drive innovation and investment. The FCC, however, seems to start from the position that only regulation can ensure that adequate services are provided to businesses. And so the agency is seeking to set prices at a level that, while convenient for some competitors, doesn’t allow for a sufficient return on investment to stimulate broadband deployment. How this approach will spur investment and deployment is anyone’s guess; the FCC doesn’t have an answer.
Under the FCC’s proposal, areas the agency deems competitive with multiple business data service providers would remain unregulated. While good for urban and suburban America where high demand for BDS currently exists and multiple service providers meet the demand, that approach will worsen the existing 4G LTE deployment gap between urban and rural areas and severely hinder the rural area deployment of next-generation, super-fast 5G mobile networks. Instead of bringing nearer the time when all Americans will have the benefits of broadband service, the FCC’s proposal flies in the face of the Obama Administration’s longstanding goal of bringing high-speed broadband to 98% of Americans within this decade.
The Federal Communications Commission has been extremely active as of late, and this rush to regulate has not been without its headaches. Case in point: The Commission’s proceeding in relation to Special Access services (Business Data Services (BDS).
The market has transformed dramatically as cable companies now offer competitive business data services. Their reliable high speed cable/video systems now pass a huge number of the nation’s businesses, and entry into this market makes obvious sense for them as they face increasing competition for their traditional video services.
But for the FCC, this evidence of real competition is not enough.
Based on an analysis of the FCC’s own data, it turns out that 25% of buildings that have a connection only to an incumbent local exchange carrier’s (ILEC) special access services are only 17 feet away from the nearest competitive provider’s fiber network; 50% are 88 feet away, and 75% percent are within 456 feet. The mean distance for all relevant buildings is 364 feet.
This week the FCC allowed parties to release some aggregate data in the broadband market collected as part of the ongoing special access proceeding. And this data, even though partial, confirms what I and others have been saying all along: virtually all businesses have access to real, facilities-based competition today.
The data provided publicly by U.S. CLECs and cable operators confirms the few facts that have so far emerged from the FCC’s special access data collection, i.e. that there is extensive facilities-based competition in the business broadband market.
One would think that preserving competition and expanding investment would always be the principal task and goal of a regulatory agency, but this hasn’t been the case with special access. Instead, we’ve seen the CLECs, for two decades, hold on to their special privileges, including price regulation, forcing ILECs to maintain two networks, one of which the CLECs use to offer a slower, technologically inferior product to that which cable now offers.
Wall Street knows that in the competitive world of telecommunications, the companies that invest in newer and faster technologies are the ones most likely to do better over time—even better if these investments lower the companies’ operating costs, as Sprint claims on its backhaul costs. Sprint obviously knows all this, too, which is why it is so eager to convince Wall Street analysts that it is a thoroughly modern company deserving of their money.
But Sprint can’t perform the straddle forever. Let’s take Sprint at its word that it is investing and competing in a highly competitive market, even at the same time reducing capital expenditures. It’s time to end the special pleading for special access, invest, and compete. That’s what great companies do.
Sprint tells Wall St. that competitive market rids need for special access, yet lobbies FCC to extend regulation for competitive advantage.
Special Access is receiving a lot of attention these days, mainly due to the FCC’s controversial stance on the topic. And now US Telecom has released three white papers on Special Access and the competitiveness of business broadband.
In 1973, the Edgar Winter Group scored a Top 20 hit with “Free Ride.” In 2016, Competitive Local Exchange Carriers (CLECs) are trying to score a free ride from the FCC via heavy regulation of special access rates.
While the CLECs like to claim there is a monopoly in the business broadband market, investment numbers say otherwise.