FCC’s Bulk Data Rule Imposes Blanket Price Caps on Old Tech

(Rob Kunzig/Morning Consult)

The Federal Communications Commission unveiled on Friday a long-expected rule to regulate the prices of the bulk data services that connect ATMs and retail outlets to business data centers, circulating the item among commissioners for a final vote that could come at any time.

The rule will be final once it receives votes from at least three of the five commissioners.

The price caps in the rule are designed to spur competition in the “business data services” market, or BDS. The networks are also used among smaller wireless companies, buying the service from larger legacy carriers.

Last month, Chairman Tom Wheeler promised a vote on the issue “by the end of the year.”

A senior FCC official told reporters Friday the new price-control regime is intended to incentivize telecommunication companies to upgrade from slower, predominantly copper wire services to newer and faster services powered by packet-based Ethernet technology.

“By removing the excess profit from the legacy services, it will remove the incentive for the telcos to keep their customers on those legacy services,” the official said, adding that the move to Ethernet is particularly important as part of the ultimate transition to 5G.

The new BDS rule comes in the wake of an April FCC vote that banned certain practices used by historically entrenched companies such as AT&T and Verizon Communications.  

That rule also suggested that the FCC would go further and implement a price-control scheme to promote competition in the bulk data services market. The regulators asked telecommunication and cable companies to submit their own ideas for regulating BDS prices.

Companies submitted a flurry of proposals, but a compromise between Verizon and Incompas received the most attention from groups on both sides of the debate. Incompas is a trade group that represents Sprint and T-Mobile as well as big internet companies such as Google.

Senior FCC officials told Morning Consult the commission’s final rule tracks closely to the Verizon/Incompas deal, but with a few caveats.

The FCC largely adopted the proposal’s uniform pricing regime. The commission plans to impose a one-time price cap on all bulk data services operating at under 45 megabytes per second that are transmitted over old technology that typically utilizes copper wires.

Prices on those services would be pushed downward by 11 percent over a three-year period and would be offset over time by inflation.

The commission broke with the Verizon/Incompas plan by refusing to place price caps on packet-based Ethernet services, including those operating under 45 megabytes per second.

Though the FCC still asserts its right to regulate Ethernet services in the future, the regulators hope that the “lighter-touch” regulation will spur greater investment in the new technology. Any price concerns with Ethernet BDS would be adjudicated by the commission through a complaints process.

The new rule also scraps a much-discussed provision that would have tested the competitiveness of the BDS marketplace by region on a census-block basis. Under that plan, commissioners would have imposed price caps only in markets found to be non-competitive.

With the current plan, the caps apply across all marketplaces, regardless of their competitive nature.

In a statement following the commission’s announcement, Sprint “commended” Wheeler “for moving forward with plans to reform the BDS market.” The competitive carrier said the BDS marketplace “has suffered from a lack of competition, costing the American economy billions and slowing investments in next generation broadband technologies.”

The reaction from long-time opponents to FCC price caps was more mixed. While AT&T was pleased that the commission chose not to impose price controls on Ethernet services, it blasted the FCC for its decision to regulate copper-based technology without considering the number of competitors operating in a specific market.

“This proposal is little more than a wealth transfer to companies that have chosen not to invest in last mile fiber infrastructure,” Bob Quinn, AT&T senior executive vice president of external & legislative affairs, said in a statement. “It will result in less fiber investment and contribute to mounting job losses at a time when our country needs just the opposite.”

USTelecom, another opponent of BDS price controls, was also happy that the commission will not regulate Ethernet. The group expressed concern over the FCC’s failure to examine local marketplaces on a case-by-case basis. In a statement, USTelecom called the commission’s blanket price caps on TDM technology “indiscriminate price regulation,” and said they are “inconsistent with the commission’s obligation to engage in reasoned decision-making based on the record before it.”

An FCC official said the commission may vote on the circulated BDS rule at any time. The official added that the FCC may choose to place the plan on the docket for a public vote during the commission’s public meeting on Oct. 27.

Morning Consult