FCC Draft Targets Rate Regulation on Legacy BDS, Seeks Higher-Speed Light-Touch
FCC Chairman Tom Wheeler circulated a business data service draft order Thursday to take "overdue steps to reform a long-broken regulatory regime" for BDS, the commission said Friday. "The Order strikes a balance between targeted regulation for legacy TDM (DS1 and DS3) services, where evidence of market power is strongest, and lighter-touch regulation of packet-based services, where there has been new entry and competition may be emerging," said an agency fact sheet. Communications Daily had reported that such an order was going to circulate Thursday, which would allow it to be possibly added to the agenda for the Oct. 27 meeting.
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The lower-speed TDM services would be covered by price-cap regulation, and subjected to a one-time rate cut of 11 percent phased in over three years, starting in July 2017 (3 percent in year one, 4 percent in year two and 4 percent in year three), the FCC said. Going forward, also starting in July 2017, price caps would be reduced by an "X-factor" of 3 percent, offset by inflation, to account for productivity gains. "Phase I" pricing-flexibility rules would be applied to all price-cap LECs, allowing for negotiated contracts that can set rates below tariffs filed at the commission. Consistent with an earlier tariff investigation order, new "all-or-nothing" BDS plans would be prohibited and "excessive" penalties for early termination or failure to meet volume commitments would be "reined in."
BDS services above DS3 level services (45 Mbps) appear to face emerging competition that is driving down prices, said the three-page summary. "Recognizing these trends, the Order applies a light-touch regulatory approach that promotes continued investment while ensuring just and reasonable prices and other terms." The FCC said elements of that higher-speed framework would include reaffirming that packet-based BDS is largely a telecom service, as is TDM-based service, meaning that providers offering those services, "with rare exceptions," would be common carriers subject to related requirements such as dealing with others on "reasonable and nondiscriminatory terms." There wouldn't be any "network unbundling or wholesale rate discounts," nor would there be "price caps, benchmarking or other forms of ex ante pricing regulation" of the higher-speed services, the agency said. There would be a "robust complaint process," however, with wholesale rates presumptively unreasonable if they exceed retail rates, among numerous other considerations.
A new Further NPRM would seek comment on how best to collect data, continuing market developments, and any further "administratable means" to deal with any concerns that emerge regarding packet-based BDS, the FCC said. The draft would also "level the playing field" for all packet-based and circuit-based BDS services with speeds above 45 Mbps by "granting uniform forbearance to certain portions of Title II" of the Communications Act, including dominant-carrier and tariffing obligations, it said.