Excerpt from a press release issued by the Phoenix Center for Advanced Legal & Economic Public Policy Studies:
In May 2016, the Federal Communications Commission (“FCC”) issued a Further Notice of Proposed Rulemaking in which it outlined a “new path forward” for imposing price regulation on high-capacity telecommunications circuits sold to businesses and other telecommunications providers. These services have historically been referred to as Special Access Services, but now the Commission prefers the label Business Data Services (“BDS”), a broader classification that includes not only Special Access services but also unregulated high-capacity Ethernet services. In its BDS NPRM, the Commission outlines a two-step procedure for determining if it will apply rate regulation: As a first step, the Commission proposes to determine “whether market power exist[s]” for BDS and where. If the Commission determines that market power exists, then the Agency proposes to apply a price-cap “style” regime to the prices of BDS. The problem, however, is that nowhere does the Commission define its concept of “market power.”
In a new POLICY PAPER released today entitled How (and How Not) to Measure Market Power Over Business Data Services, Phoenix Center Chief Economist Dr. George S. Ford attempts to fill that gap by constructing a policy-relevant definition of market power for BDS. Dr. Ford then considers whether the Commission’s analysis is capable of identifying the presence of or quantifying the magnitude of market power for BDS. As Dr. Ford demonstrates, it is not. As Dr. Ford points out, the analysis of the Agency’s economic expert, Professor Marc Rysman, is unsupported by basic economics and good econometrics, and is thus incapable of providing any meaningful evidence regarding the presence or absence of market power.