The Issue

Business Broadband Service Competition Is Booming:
Proposed FCC Regulation Would Throttle Investment,
Penalize Consumers, and Cost American Jobs

Let’s Not Deter Investment in Business Broadband Services.

For decades, Incumbent Local Exchange Carriers (ILECs) – companies who have invested billions building out the fiber to accommodate the broadband needs of businesses from coast-to-coast – have provided access to their facilities at reasonable rates for competitors. The arrangement has allowed ILECs to recover their costs and invest in more infrastructure, while supporting more competition in the marketplace for consumers.

In the name of expanding these business broadband services, the Federal Communication Commission (FCC) has recently devised a price regulation scheme rooted in misguided economic theory. The FCC plan claims slashing the currently regulated ILEC wholesale rates that are charged to wireless and Competitive Local Exchange Carriers (CLECs) would further increase investment by competitive network facilities providers.

In fact, the FCC scheme will have the opposite effect. If infrastructure providers are forced to cut their rates at the behest of this imprudent plan, they will be forced to cut hundreds of millions in future investment needed to build and upgrade network facilities, eliminating American jobs.

Further exasperating the situation is the FCC’s apparent desire to use new regulation of business broadband services to fund 5G Technology for wireless carriers. If the FCC desires to subsidize a 5G buildout, it should not be done on the backs of the wireline industry – an industry with one-tenth the earnings of the wireless companies.

The fact is that without the investment into the backhaul infrastructure to make the necessary wireless connections to national fiber networks, future 5G technology would be rendered useless. In other words, if the FCC’s goal is to help nurture 5G, its current business data services proposal would instead deprive the broadband market of the investment that makes the technology possible.

We believe in the future of 5G and look forward to helping make it a reality. Let’s not allow a misguided proposal to derail its prospects.

Before They Regulate, Let’s Get the Facts Right.

It is imperative the FCC not pursue new regulation until they have all of their facts in order.

The major cable providers (Comcast, TimeWarner Cable, Charter, and Cox) recently filed updated data with the FCC that more accurately reflects that industry’s deployment of facilities that already provide CLECs a competitive alternative for wholesale services. This data proves that cable’s footprint is 22 times greater than what the FCC is currently using in its analysis.

A petition has been filed with the FCC requesting that this irretrievably flawed data be stricken before the FCC regulates. Further, we are asking that the FCC submit for peer review new research it has produced on competition in the business data services marketplace. Not only are the peer reviews the right thing to do, but it’s required under both the Administrative Procedure Act the Data Quality Act, which govern rule-making procedures.

Let’s Acknowledge Current Competition and Investment…And Ignite Even More.

Facilities-based providers are investing in business broadband at an unprecedented level. The Cable industry’s capital investment in the last two years – 2014 and 2015 – was estimated at $6 billion and competitive fiber providers invested an estimated $9 billion during that same time. That’s nearly $15 billion in competitive investment over two years.

As a result of this increased investment, the Cable industry alone has seen business revenues increase from nearly $4 billion in 2009 to $14 billion in 2015.

Based on the new Cable data referenced above, the FCC has failed to account for the fact that competing facilities (Competitive Local Exchange Carriers, Cable) have been deployed in over 95 percent of census blocks with business broadband demand.

Simply put, the FCC should not ignore the accurate level of wireline, cable, and CLEC competition in thousands of locations. The FCC order must acknowledge the marketplace reality and recognize competition is thriving.

Let’s Limit Regulation to Monopoly Areas.

In non-competitive areas the FCC rightly should ensure wholesale access at reasonable rates.

Unfortunately, the FCCs current position argues rates frozen in 2005 for non-competitive rural areas were, in retrospect, set too high. Its solution is a draconian rate cut – as high as 20% – that essentially punishes companies that obeyed the rules the FCC created. Plus the Commission would also impose an arbitrary annual 3-5% rate cut – indefinitely – with no recognition of actual costs required to deliver service.

The FCC should not change the rules after the game is over. Instead of retroactive rate adjustments, the commission should only regulate rates in truly non-competitive areas going forward and base that regulation on real cost to provide service.

Let’s Put Rural Communities and Small Businesses on a Path to Broadband Connectivity.

If the current FCC proposal is ratified, rural communities and small businesses will be hit particularly hard. The FCC proposal hopes that these consumers will be covered by 5G Technology. However, there are no standards as to what is considered 5G – and won’t be until 2018 at the earliest – and broad deployment of 5G will not happen in densely populated areas until 2020, with rural areas left to wait.

In order for higher speed wireless to be deployed in rural areas, fiber backhaul will need to be built. In a case of regulatory bait and switch, this is the same fiber backhaul that the FCC wants to slash pricing for – making further deployment uneconomical. This creates a perfect storm for small business in the highest cost areas to be marooned using a technology with the same concerns as current wireless offerings: reliability, security, and price.

The fact is that wireless networks in rural areas will continue to struggle with line of sight, long distances, unsecure transmissions of sensitive data, and data plans that would make high speed access unaffordable for most small business, following today’s pricing structure. Reliability could be addressed with further build of the business broadband infrastructure – the exact investment put at risk by the FCC proposal.

Ask the FCC to Agree with the Petition Request:
Strike the Irretrievably Flawed Data and Peer Review Any New Research.
Let’s Support Investment that Creates Jobs and Drives Real Competition.

investinbbandThe Issue