USTelecom Proposes BDS Competitive Market Test at Census Tract Level

The ILEC trade group said BDS data showed competitor locations and market effects, with the FCC concluding that competitors materially influence pricing up to a half-mile away. "Because there are over 1 million BDS locations, we have devised a simplified, but extremely accurate way to test for competitive influence consistent with that conclusion," USTelecom said. "Our test would apply at a census tract level and ask whether two facilities-based firms are within 2,000 feet of the census tract. It can be applied based on the location of all competitive facilities or limited to measuring 2,000 feet only from fiber facilities." The group said that fiber network firms routinely build links to customers 2,000 or more feet away, and that the 74,000 census tracts across the country are far more granular than the more than 100 metropolitan statistical areas under the FCC's current test.

Incompas said the proposal is nothing new. “This is nothing but a retread attack from those who seek to keep prices high, investment low and business customers stuck in the past," emailed General Counsel Angie Kronenberg. "USTelecom is ignoring key analyses in the BDS docket, including from a former FCC Chief Economist who has found significant lack of competition has led to market power abuse and higher prices. A broad coalition of diverse and forward looking industry leaders, business customers, consumer groups and schools, hospitals and libraries organizations have united to push for FCC action, and the proponents for the past find themselves increasingly isolated."

AT&T said recently revised FCC staff BDS market regression analysis disputed many prior results "purportedly demonstrating the presence of market power" in legacy DS1 (1.5 Mbps) and DS3 (45 Mbps) services. "Those results now show nothing of the sort," said Caroline Van Wie, assistant vice president-federal regulatory, in a blog post. She wrote that a white paper submitted Thursday by Mark Israel, managing director of Compass Lexecon, and two academics showed "the revised regressions do not address the core, foundational flaws that continue to plague" the FCC exercise. "Because of these deep-seated flaws, the regressions continue to produce wildly inconsistent and often anomalous results that in many cases conflict with basic economics. These erratic results confirm that the endogeneity and other data-related flaws are dominating the regressions, and thus they cannot be used to support any conclusions about ILEC market power for DS1s and DS3s," Van Wie wrote.

CenturyLink made filings criticizing Incompas/Verizon joint proposals for BDS rate cuts (here, here), the second summarizing a meeting it and Frontier Communications had with Commissioner Mignon Clyburn and an aide. Comcast said in a filing there is no justification for expanding regulation of BDS incumbents or new entrants, but said if the commission adopts a regulatory backstop for wholesale services, it should model it on a data-roaming requirement that wireless carriers negotiate commercially reasonable agreements. Rainbow PUSH Coalition founder Jesse Jackson and Southern Christian Leadership Conference CEO Charles Steele sent separate letters (here, here) urging the FCC to consider the impact of possible BDS regulation "on American workers and small business."

Level 3 supported comprehensive BDS changes to prevent ILECs "from abusing their market power" in both the circuit-switched and packet-switched BDS markets. In a filing on a meeting with FCC staffers, it also endorsed the Incompas/Verizon BDS regulatory proposals. The Competitive Carriers Association lobbied Wireline Bureau Chief Matt DelNero and other agency staffers on the BDS impact on innovation and competition in the wireless market, said a filing.