Excerpt from a letter sent by Jonathan Banks and Diane Griffin Holland of United States Telecom Association to FCC Secretary Marlene Dortch:
The Commission’s business data services (BDS) data show with relative clarity where competitors are and how far their competitive influence on pricing extends. We have built a test based on that evidence. The test proposes that the FCC step back from dictating prices for BDS services wherever two competitors exert competitive discipline over pricing. The Commission has already concluded that competitors at a distance of up to one-half mile (2,640 feet) have a material influence on pricing. 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.
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. We have verified that this test results in almost every building (over 90%) in those census tracts being within 2,000 feet of two competing firms, and thus subject to “material” pricing competition. This test is far more granular than the current MSA-based test, involving about 74,000 census tracts instead of just over 100 MSAs. This test will measure and encourage true, facilities-based competition, will reward investment and innovation, and will support the new fiber facilities that the country needs to lead in 5G deployment and for improved business connectivity and productivity.
Any test used to determine when the FCC should step back from monopoly era regulation under which it would set prices for BDS services should reflect what can and cannot be learned from the data the Commission has gathered and the Commission’s longstanding commitment to facilities-based competition. As Chairman Wheeler has noted, “if you’re going to get competition, competition is a facilities-based issue, it is not an ersatz unbundling issue.”
A revised regulatory scheme for BDS should aim to increase, or at a minimum, maintain, incentives to invest in the most modern business networks possible. A “two-competitor within 2,000 feet” test has the advantage of being based on factual data in the record and coherent economic theory. Where that test is met, price setting by the Commission is very unlikely to improve on the results of the competing firms, but will raise costly barriers to investment and innovation that will harm real competition and will slow the transitions to fiber, 5G wireless and other new technologies.