A federal appeals court has upheld the majority of the FCC's 2017 Business Data Services (BDS) revamp.

The NCTA--The Internet & Television Association had backed the BDS remake under FCC chair Ajit Pai, who had not supported the previous approach adopted under chairman Tom Wheeler. 

In a party line vote, the FCC Republican majority on April 20, 2017, adopted a BDS Report and Order, under Pai, declaring the BDS market generally competitive—a distinct departure from Wheeler's more regulatory proposal, which had concluded the market was insufficiently competitive. The Pai BDS approach deregulated the rates incumbent providers can charge for services like wireless backhaul, credit card readers, ATMs and institutional hookups to schools and libraries.

“It’s a good day for forward-thinking regulation," said Pai of the court decision. "Here’s why: Last year, based on a thorough analysis of a massive amount of data, the Commission adopted a ‘competitive market test’ to determine where regulation of business data services was still needed and where it would impede investment, innovation, and competition. I’m pleased that the Eighth Circuit upheld that test and the detariffing and deregulation of last-mile business data services that the test suggested. Indeed, the court recognized that the Commission had proposed ‘large scale de-regulation’ and repeatedly affirmed the Commission’s policy judgments as reasonable."

Related: FCC Praises Court Decision Not to Delay BDS Reform

The FCC had argued that its new policy of releasing drafts of item three weeks before a vote allowed sufficient time for comment, but the court said that was not the case and remanded that portion of the decision back to the FCC. "The court did identify a narrow procedural issue that the Commission needs to address," said Pai, "and I look forward to working with my colleagues to do just that as soon as possible."

But the court left intact the FCC deregulatory changes, which was a victory for ISPs who had sought more flexibility to deliver business broadband. 

“Today’s court decision is a win for consumers and another important step toward modernizing the delivery of broadband services and incentivizing new investment in the most efficient and effective way," said Jonathan Spalter, president of USTelecom. While the transport issue was vacated on procedural grounds, we are confident that upon remand, the FCC will find that transport services are fully competitive and not subject to pricing regulation.

“In no world is one or two broadband providers sufficient competition – we call that monopoly and duopoly for a reason," said Angie Kronenberg, chief advocate and general counsel of INCOMPAS, which challenged the FCC's remake under Pai. "The court’s decision does not change the fact that competition remains the law of the land.“While the court deferred to the expert agency’s review of the evidence and the FCC’s prediction that more competition in the BDS market would be coming, we urge the agency to follow through with a complete analysis of the market in two years," said Kronenberg. "To do so, the Commission needs to ensure it is collecting the right data, which is why INCOMPAS is advocating for reform to the FCC’s Form 477 collection to ensure BDS data is sufficient. INCOMPAS believes that at least three providers offering service over their own last mile facilities are necessary for sufficient competition for fixed broadband."

The Schools, Health and Libraries Coalition (SHLB) focused on the remand of the transport dereg notice as a bright spot. 

"We are pleased that the court questioned the FCC's decision to deregulate transport services," said John Windhausen Jr., SHLB Coalition executive director. "Schools, libraries, health providers, and other anchor institutions in rural areas and non-competitive markets are vulnerable to price increases when they have few broadband options. The court's remand will give the FCC another opportunity to examine real world evidence about the impact of transport deregulation on anchor institutions before making a final decision."

A trio of Arkansas Republicans has asked FCC chair Ajit Pai to give network providers a "reasonable transition period" before adopting a new, dregulatory, broadband businesses data services (BDS) proposal the FCC is voting on April 20.

That came in a letter to the chairman from Sens. John Boozman and Tom Cotton and Rep. French Hill.

They told Pai that while they support his efforts to "identify and eliminate unnecessary rules and regulations" and to modernize telecom nets, they also want him to buffer the "potential disruptions" and "unintended consequences" on small businesses (competitive carriers) of deregulating rates for incumbent, large, players like AT&T and CenturyLink.

They argue that a transition period would create a "window" for planning for price increases or purchasing IP-enabled equipment--the proposal is looking to speed the transition to IP-based services, they point out.

They did not say how long a transition period they wanted, but did note that wireless 5g deployments targeted for 2020 "may serve to hold prices in check despite the highly concentrated ownership of BDS facilities [by the incumbents,  former Bells who built out as regulated monopolies]. They also said a transition runway would allow providers to educate consumers about "the coming changes," including "price hikes" and "termination of service."

The use of terms like "hike" for prices, and "disruptions" and "highly concentrated ownership" had more of the flavor of a Democratic letter than one from Pai's own party.

The Small Business Administration's advocacy office has also called for an "adjustment period" to the new regs, though it also called for a delay of the vote.

USTelecom, which represents major telco ISPs, was rooting on FCC chair Ajit Pai's business data services (BDS) proposal, which deregulates rates for incumbent providers like USTelecom members AT&T and Verizon where there is competition.

Pai has said he thinks that comprises a lot of places. But the association was pushing even further, saying the item could have been even more deregulatory.

Pai has scheduled a vote on his proposal for April 20.

USTelecom execs, including group president, Jonathan Spalter, told Paiin an April 10 meeting that the proposal to "reduce" the FCC's "price setting role" was "relatively constrained," and pointed to the benefits of more broad price relief, including a finding that incumbent telecoms are no longer de facto dominant, according to an ex parte filing on the meeting.

USTelecom argued that the FCC data on BDS understates the current level of competition and that its competitive market test -- for price deregulation -- may be too conservative.

Critics of the BDS proposal argue that it is overestimating the competition and have called on the FCC to release the data on which markets meet the test or delay the vote.

Washington — Federal Communications Commission chairman Ajit Pai is proposing major deregulation of broadband business data services (BDS) — such as credit card readers, ATMs and institutional hookups — and that’s good news for cable ISPs looking to get a bigger piece of that business without government restrictions.

While former FCC chairman Tom Wheeler’s proposal initially imposed potential new rate regulations on cable Internet-service providers and reimposed them on incumbent providers, Pai mostly sees a booming, competitive business in business broadband.

“The extensive record compiled by the commission’s excellent staff shows substantial and growing competition in many areas of the country, thanks to new market entrants like cable companies,” Pai said in a blog post.

Pai is extending his deregulatory view to that marketplace with a proposed report and order he plans to vote on at the April meeting.

‘VIGOROUS’ MARKET
Generally, the new takeaway from that proposal is that competition for most business broadband services is “robust and vigorous” and legacy regulations are “more likely to impede the introduction of new services and raise prices than to benefit consumers.”

That’s in contrast to the Wheeler proposal, which was predicated on the assumption that incumbent providers were levying “artificially high prices being charged to small businesses, schools, libraries and, ultimately, consumers.”

Scott Cleland, chairman of the ISP-backed NetCompetition, said, “Everything the Pai FCC has signaled so far is much less regulation of the BDS market not more, and that is very good news for more competitive infrastructure investment.”

Cable is recognized as a major force in the order, a dramatic change in the market over the past decade. “Cable providers have emerged as formidable competitors in this market,” citing stats from MoffettNathanson principal and senior analyst Craig Moffett that cable’s annual BDS growth rate has been 20% over the past few years, as it takes on the incumbents and competitive local-exchange carriers.

That translated to a $12 billion piece of the BDS market in 2015, said the FCC, with a projection for that share to double by 2019.

Cable operators, including NCTA: The Internet & Television Association, had pushed the FCC this time around to clarify that some broadband business services are private carriage not subject to the requirements of Title II of the Communications Act, such as “just and reasonable” rate regulation.

The order delivers that clarification, or at least it proposes to do so, confirming that cable operators can offer BDS service as a private carriage service not subject to Title II regulations. That would allow smaller operators that might not typically offer BDS to provide one-off offerings for specific customers.

Cable operators had sought that flexibility under the Wheeler proposal, but the idea did not get traction.

The FCC also concluded that having a competitor “nearby” is sufficient to qualify a market as competitive or, as the order puts it: “Traditional and nontraditional providers of business data services constrain an incumbent’s pricing outside of immediate geographies used to describe market concentration” in the Wheeler proposal.

The order cites cable as such a competitor, using as an example a cable company with “nearby” fiber nodes and the ability to provide Ethernet service over either fiber or hybrid fiber coax.

While the thrust of the order is to deregulate the price cap on incumbent carriers such as AT&T and Verizon Communications, a deregulatory tide lifts all boats.

At first blush, it might appear to be an advantage to have your competitors reregulated. A cable executive speaking on background, though, said that subjecting competitors to rate regulation is frequently “not a good thing.”

For instance, he suggested, were the FCC to cap rates at cost for an MSO’s ILEC competitor, cable operators would be forced to compete at that capped price. Thus, the free market of rates Pai is aiming for is preferable to self-regulating at a competitor’s level.

Being able to provide BDS as a non-common carrier service is one advantage, as is not subjecting cable operators to a new category of rate regulations should they invest to compete against the ILECs.

CLEC PUSHBACK
INCOMPAS, which represents the competitive telecoms that backed Wheeler’s regulatory approach to ILECs, was pushing back last week, looking for proof of the FCC’s assertion that most markets (92%) were sufficiently competitive to preclude price regulations to prevent monopoly and duopoly pricing.

Invoking the transparency chairman Pai has been pushing, INCOMPAS called on the FCC to release that information before the April 20 vote.

“It is critical to a thoughtful and reasoned consideration of this order to be able to assess exactly what that means, and how many small and medium-sized businesses and critical community institutions could face dramatic price hikes,” INCOMPAS said.

SIDEBAR: Tale of the Tape
According to an FCC summary, the agency’s new business data order, scheduled for a vote April 20, would:
■ “Confirm that certain competitive offerings constitute private carriage.”
■ ”Find that competition for lower-speed services (DS1s and DS3s) is robust in some, but not all, counties, and apply a competitive market test to determine where actual and potential competition is likely to constrain prices and lead to additional investment.”
■ “In areas with sufficient competition, modernize rules to facilitate additional infrastructure investment and next-generation services by ending tariffing and other legacy pricing regulations.”
■ “In areas without sufficient competition, maintain price caps …”
■ “Grant carriers additional flexibility to offer discounts in such areas to schools, libraries, r ural healthcare clinics, and other special access customers.”
■ “Ensure continued Commission oversight by prohibiting the use of agreements that would bar disclosure of contract terms to the FCC going forward.”
— John Eggerton

The FCC has released its agenda for the April public meeting, and as expected, it includes a vote on restoring the UHF discount, at least temporarily. It is a packed meeting, with a new take on Business Data Service(BDS) regs, helping out noncoms, rolling back another Tom Wheeler reg, and speeding the retirement of legacy copper.

 "Last September, the FCC voted to eliminate the [UHF] discount on a party-line vote. That decision has been challenged in the U.S. Court of Appeals for the D.C. Circuit," FCC Chairman Ajit Pai blogged about the meeting. "In my view, the FCC is likely to lose that litigation because it went about eliminating the UHF discount in the wrong way. So I’m proposing that we hit the reset button, returning the rule to the way it was up until last fall. And then we’ll launch a comprehensive review of the national ownership cap, including the UHF discount, later this year."

In dissenting from that party-line vote, Pai said that while he was not necessarily opposed to eliminating the discount, he was if it did not include at the same time reviewing whether the 39% national broadcast ownership cap should also be adjusted.

The agenda for the meeting is a lengthy one (see below). It also includes:

Allowing noncommercial stations more flexibility to raise money for disaster relief without having to seek FCC waivers.

Pai is proposing to allow stations to use up to 1% of their airtime for such fund-raising for nonprofits, although it would not apply to stations funded by the Corporation for Public Broadcasting (CPB). That could be a moot point if President Donald Trump gets his way and CPB funding is eliminated.

Pai has another gift of sorts for noncoms, and another rollback of a rule.

The FCC will vote to eliminate a rule adopted by the FCC under his predecessor that would require officers and board members of noncoms to provide personal information to the FCC as part of its data collection on ownership diversity.

Noncoms were opposed to the rule because they said it would discourage people from wanting to serve in those positions, as was Pai, who says the FCC "should be thanking people who want to serve their community in this way, not imposing unnecessary regulatory burdens upon them."

The chairman is also taking another crack at updating.deregulating Business Data Service (BDS).

Wheeler attempted to do so, but ran out of time on a proposal that would have potentially regulated competitive BDS entrants, including cable operators, which those ISPs said was punishing them for providing the competition to incumbents that the FCC itself promoted.

There has been a lot of activity in the BDS docket in the past few weeks, with some folks wanting the chairman to close the docket, while others wanted various variations on the Wheeler effort. Cable operators just wanted to make sure Wheeler's potential regulation of new entrants was off the table, while competitive carriers wanted the Wheeler proposal, midsized carriers wanted more dereg, and AT&T wanted dereg, but preserving regulatory tests for the level of market competition.

Pai appeared to be steering toward the more deregulatory views of mid-sized carrriers, said one telecom source.

“The extensive record compiled by the Commission’s excellent staff shows substantial and growing competition in many areas of the country, thanks to new market entrants like cable companies," Pai blogged of his BDS item. "Where this competition exists, we will relax unnecessary regulation, thereby creating greater incentives for the private sector to invest in next-generation networks. But where competition is still lacking, we’ll preserve regulations necessary to prevent anti-competitive price increases."

It will also be something of an infrastructure-themed meeting.

The chairman is proposing to 1) help companies speed up the retirement of copper networks, 2) seeking comment on whether state and local reg are impeding network deployment and whether the FCC should preempt such impediments; and 3) expedite state and local approvals of wireless infrastructure deployment applications to speed the rollout of 5G. 

Following is the FCC's tentative agenda for the April meeting:

"Connect America Fund – The Commission will consider an Order on Reconsideration that would amend the construction project limitation within section 54.303 of the Commission’s rules to permit carriers to report, for universal service purposes, capital expenses per location up to the established per-location per-project limit, rather than disallowing all capital expenses associated with construction projects in excess of the limit. (WC Docket Nos. 10-90 and 14-58; CC Docket No. 01-92)

"Wireline Infrastructure Deployment – The Commission will consider a Notice of Proposed Rulemaking, Notice of Inquiry, and Request for Comment that would propose to remove regulatory barriers to infrastructure investment, suggest changes to speed the transition from copper networks and legacy services to next-generation networks and services dependent on fiber, and propose to reform Commission regulations that are raising costs and slowing, rather than facilitating, broadband deployment. (WC Docket No. 17-84)

"Wireless Infrastructure Deployment – The Commission will consider a Notice of Proposed Rulemaking and Notice of Inquiry that commences an examination of the regulatory impediments to wireless network infrastructure investment and deployment, and how the Commission may remove or reduce such impediments consistent with the law and the public interest. (WT Docket 17-79; WT Docket 15-180)

"Business Data Services – The Commission will consider a Report and Order that recognizes the strong competition present in the business data services market and modernizes the Commission’s regulatory structure accordingly to bring ever new and exciting technologies, products, and services to businesses and consumers. (WC Docket Nos. 16-143, 15-247, 05-25; GN Docket No. 13-5; RM-10593)

"Reinstating the UHF Discount – The Commission will consider an Order on Reconsideration to reinstate the UHF discount used to calculate compliance with the national television audience reach cap. (MB Docket No. 13-236)

"Noncommercial Educational Station Third-Party Fundraising – The Commission will consider a Report and Order that would adopt rules permitting NCE stations not funded by the Corporation for Public Broadcasting to alter or suspend regular programming in order to conduct fundraising for third-party non-profit organizations so long as such stations do not spend more than one percent of their total annual airtime on such activities. (MB Docket No. 12-106)

"Promoting Diversification of Ownership in the Broadcasting Services – The Commission will consider an Order on Reconsideration that would allow noncommercial broadcasters greater flexibility to use a Special Use FRN for ownership reporting purposes and avoid the need to submit personal information to the Commission. (MB Docket No. 07-294; MD Docket No. 10-234)

FCC chairman Tom Wheeler has apparently acceded to Republican requests and has pulled votes on four controversial items -- at least in the sense of not having Republican backing -- including the business data services revamp.

Also off the agenda for the Nov. 17 public meeting, according to a "deletion of agenda items" notice, was a vote on classifying LTE VoIP, rules for the second phase of its USF mobility fund allocations, and boosting the amount of video described programming for the bind and vision-impaired.

The items remain on circulation, which means they could theoretically still be voted, but that is unlikely.

Republican legislators, citing precedent when Dems took over the White House in 2008, this week asked Wheeler to ramp down his regulatory agenda.

“We are disappointed that the FCC will not act on the previously announced November agenda," said Harold Feld, SVP of Public Knowledge. "While respecting the tradition that the FCC should generally wait for the new administration before acting on any new initiatives, these items were essentially completed and ready to move. It seems absurd that if Chairman Wheeler had scheduled the meeting on election day, we would have already resolved the decade-old proceeding on legacy business data services pricing.

 “More importantly, the agenda items address real and pressing problems in the broadband marketplace. These problems do not simply go away due to an administration change. When Republicans take over, they will need to address the same competitive problems, or explain to the American people why they plan to perpetuate our broadband duopoly.”

The FCC had heard from both sides of the Hill, at least Republicans on both sides, that it should focus on wrapping up current project, with consensus support, rather than vote any new controversial regulatory proposals-among the most prominent of the latter are business data services (BDS) revamps -- which had been scheduled for that vote Nov. 17 -- and a set-top box "unlocking" proposal that is currently on circulation but has shown no signs of being voted as yet.

Sen. John Thune (R-S.D.), chair of the Senate Commerce Committee, Tuesday (Nov. 15) wrote Wheeler to send that message. He did not suggest canceling the Nov. 17 public meeting and even said there were some items the FCC could deal with. He didn't say which those were, though he did say "consensus items," which would exclude the BDS item, which is opposed by the Republican commissioners.

"Leadership of the Federal Communications Commission (FCC) will soon change," Thune wrote. "Congressional oversight of the execution of our nation's communications policies will continue. Any action taken by the FCC following November 8, 2016, will receive particular scrutiny. I strongly urge the FCC to avoid directing its attention and resources in the coming months to complex, partisan, or otherwise controversial items that the new Congress and new Administration will have an interest in reviewing.

There are certainly many consensus and administrative matters on which the Commission can instead focus its energies to conclude, including several items currently on the agenda for the Open Meeting scheduled to occur on November 17, 2016."

The chairs of the House Commerce Committee and Communications Subcommittee also sent a letter cautioning against action on controversial items.

That was fine with the Republican commissioners.

"“During the last presidential transition, the Commission Chairman wisely heeded the will of Congress in setting aside any remaining controversial agenda items for the next Congress and Administration to consider," said Republican FCC Commissioner Michael O'Rielly of the letters from both House and Senate Republicans. "I thank the current leadership of both Senate and House Commerce Committees for calling this precedent to everyone’s attention today, and expect that Chairman Wheeler will honor their request.”

"I welcome the letter from Chairman Fred Upton of the House Energy and Commerce Committee and Chairman Greg Walden of the House Subcommittee on Communications and Technology and the letter from Chairman John Thune of the Senate Commerce, Science, and Transportation Committee calling on the FCC to halt further action on controversial items during the transition period," said FCC Commissioner Ajit Pai, who is likely to be at least interim chairman once Donald Trump takes the oath of office. He had also called for pulling the four major items.

"Eight years ago, then-Senator John Rockefeller and then-Representative Henry Waxman called on the FCC not to consider “complex and controversial items that the new Congress and new Administration will have an interest in reviewing.” Then-Chairman Kevin Martin abided by their request. I hope Chairman Wheeler follows his example and honors the wishes of our congressional leaders, including by withdrawing the four major items on the November meeting agenda."

The Schools, Health & Libraries Broadband Coalition (SHLB), which lobbies for broadband deployment to anchor institutions in local comunities, has launched a campaign trying to get the FCC to reverse course on its new approach to business data services (BDS), saying with that approach "our kids will suffer from buffer brains rather than developing into the next generation of entrepreneurs and leaders."

FCC chairman Tom Wheeler was initially going to impose rate regs on both the Ethernet BDS service used by new competitive entrants like cable ISPs and the traditional TDM (time-division multiplexing)-based service provided by the incumbent telcos, but he subsequently switched to a case-by-case, market-by-market, complaint-driven appoach to Ethernet service price regs, saying that a balance between targeted regulation for legacy services, where evidence of market power is strongest, and lighter-touch regulation of packet-based services (cable ISPs, for example), where there has been new entry and competition may be emerging.".

SHLB doesn't see it that way. It wants the FCC to regulate both TDM and Ethernet below 50 Mbps in an "equivalent manner," saying not to do so excludes schools and libraries from the BDS revamp. It points out that 71% of E-rate funds (broadband subsidies for schools and libraries) go to Ethernet service.

SHLB wants the FCC to apply rate cuts across the board, not just to TDM, and rather than the 11% over three years price cut for TDM the FCC has proposed, they want 17%-20% cuts for both TDM and Ethernet.

It would prefer that the price regs apply to higher speeds than 50 Mbps, anything up to 1 gig, but say they are trying to be realistic given the FCC proposal not to regulate the higher speeds, where the FCC has suggested there is more competition for BDS than at the lower speeds.

The campaign, which launched with a YouTube video and press conference Thursday (Nov. 3), is called #NoBufferBrains and it wants the FCC to make "emergency improvements" to the proposal. "Emergency" because FCC Chairman Tom Wheeler has scheduled a vote on the latest BDS proposal for the Nov. 17 public meeting after originally circulating it for a vote outside a public meeting.

"Originally, the FCC promised a technology-neutral approach that would have benefited anchor institutions by lowering their costs, providing more choices, and encouraging deployment and availability of high-speed internet connections," said the group. "But at the last minute, the proposal was weakened to focus only on older technologies, or TDM lines, and pass on providing price relief for Ethernet customers."

Cable Ethernet providers don't like either of the FCC's approaches, saying it did not make sense to regulate new entrants after encouraging them to enter the market.

Representatives of the group said they had met with FCC Commissioner Jessica Rosenworcel Thursday (Nov. 3) about the issue. She has made faster and cheaper high-speed broadband to schools and libraries a centerpiece issue.

They have also met with FCC Chairman Tom Wheeler, Commissioner Mignon Clyburn and a staffer for commissioner Michael O'Reilly, and are trying to set up a meeting with Commissioner Ajit Pai.

CenturyLink says the FCC's new business data services (BDS) proposal could mean crippling rate cuts while ignoring evidence of competition.

The company accused the FCC of a flawed and dangerous approach that lacked transparency.

The FCC last Thursday (Oct. 27) scheduled a vote for the November 17 public meeting on FCC Chairman Tom Wheeler's BDS revamp.

RELATED: It's official, CenturyLink is buying Level 3 Communications in a deal valued at about $34 billion.

The chairman is proposing what is billed as a tech-neutral approach to regulating business broadband--credit card transactions and ATM connections, for example--regulating it wherever the FCC finds markets are not competitive, maintaining price caps on incumbent/independent local exchange carriers (ILECs) and regulating new competitive local exchange carriers (CLECS), including cable broadband providers on a case-by-case basis. Initially the proposal was to impose ex ante (before the fact) price regulation on incumbents according to a geographic approach, but that was changed to the case-by-case model.

On Friday, Oc. 28, CenturyLink, which was no fan of the initial proposal, slammed the latest proposal and its ILEC price caps, saying there was no basis for cuts in ILEC rates, period, and that the FCC was lowballing the cuts it was proposing.

The FCC based its new approach to business broadband (formerly called "special access) on several years of data-collection, but CenturyLink says the commission's new proposal "suggests an intent to ignore" evidence of competition and impose not only a phased-in rate reduction but in some cases an additional, initial, rate reduction.

"The layering of these reductions on top of one another is buried within the proposal, and has the potential to seriously damage providers’ ability to recover from lost income," the company told the FCC. "This drastic rate cut would cripple many providers’ ability to continue providing quality service, much less have money left to invest in broadband innovation for the future.

FOR MORE:News on the FCC's set-top box plan

At press time midday Thursday (Oct. 18), no one but FCC chairman Tom Wheeler had voted to approve either the set-top box order or business data services (BDS) combination order and Second Further Notice of Proposed Rulemaking, according to an FCC source speaking on background.

Both items were circulated for commissioner votes, and more work in the case of set-tops after not making it onto public meeting final agendas. Set-tops was circulated back on Sept. 29, BDS on Oct. 6. The chairman's "aye" is implicit in his circulating the items for others' approval, so each needs two more votes, likely only from the two Democrats on the panel.

Both the BDS and set-top items got makeovers after pushback from numerous quarters, and both were billed as more in line with alternative proposals offered up by NCTA - The Internet & Television Association and others. But in neither case were critics assuaged, arguing the items' apparent pivots -- toward app-based and more protective of content and contracts in the case of set-tops, less of an opt-in mandate for privacy in the case of broadband -- were deceiving.

The chairman could still add either item to the Oct. 27 meeting for a public vote, or push set-tops to the November meeting if it still needs work. The October meeting already has a planned vote on the chairman's proposal on a broadband privacy regulatory framework, another item that has drawn a lot of heat from industry and the Hill.

With many Hill Democrats calling for more transparency on the set-top item, holding a public vote on set-tops would be the more politic course if and when the chairman lines up two more votes for that item

A group of Democratic senators have told the FCC that Chairman Tom Wheeler's business data services (BDS) proposal could have an "outsized" negative impact on rural telecoms, including small towns and small businesses in their states.

In a letter to the chairman after he circulated his new proposal last week, the senators said that they wanted to make sure that any effort to regulate non-competitive markets (as determined by the FCC), should take into account the "real cost" and "unique challenges" of providing service to rural and small towns.

They were not exactly carrying torches and pitchforks into the debate. More like flashing yellow lights and caution flags.

They praised FCC efforts to promote broadband infrastructure, and gently cautioned that the FCC "not undercut incentives that would allow them to access these critical economic resources."

Signing on to the letter were Sens. Heidi Heitkamp (D-N.D.), Mazie Hirono (D-Hawaii), Jeffrey Merkley (D-Ore.), Jeanne Shaheen (D-N.H.) and Debbie Stabenow (D-Mich.).

In a separate letter, Democratic Texas Reps. Gene Green and Bill Flores said they were concerned that the proposal will slow investment and harm services that rely on the critical infrastructure.

Billed as an effort to "promote fairness, competition, and investment in this $45 billion marketplace, FCC Chairman Tom wheeler has circulated the order on broadcast data services (BDs) to the other commissioners for a vote.

The chairman's office calls it "a new framework for this market that strikes a balance between targeted regulation for legacy services, where evidence of market power is strongest, and lighter-touch regulation of packet-based services [cable ISPs, for example], where there has been new entry and competition may be emerging."

The order also reaffirms that both traditional and Ethernet BDS are subject to Title II. 

That means that, like the incumbent big telcos, cable ISPs are telecoms potentially subject to rate regs if found not to be providing their service on "reasonable and nondiscriminatory terms," though not price caps or other ex ante (before the fact) rate regs, say FCC officials. The item does not mandate network unbundling or wholesale rate discounts, they added in outlining the order to reporters.

But a senior official pointed out that the process is complaint driven process.

Initially the FCC was contemplating regulating all BDS service based on geographic determinations--this census block is competitive, this one isn't--but is coming up with a different approach to legacy services--still price capped--from new entrants, which will be scrutinized on a case-by-case basis.

The FCC will have a "robust" complaint process to deal with pricing and competition issues, with wholesale rates considered "presumptively unreasonable if they exceed retail rates for like services."  The FCC will also look at rates from the same provider that are materially higher than charged by the same provider for the same circuit in a nearby building with competition.

The item also seeks comment in a Further Notice on "how best to collect accurate data on market developments and what administrable means can be developed, if necessary, to deal with any concerns that may emerge with respect to pricing for packet-based BDS."

In a politically divided vote April 28, the FCC approved a Notice of Proposed Rulemaking on BDS.

The item was not on the agenda for the Oct. 27 meeting, as many had been anticipating, but can now be approved any time it gets three votes and without being voted in a public meeting.

Broadcast data services include carrying voice and data from cell towers (backhaul) to businesses and from ATMs and credit card readers.

FCC Chairman Tom Wheeler has said that competition in the BDS space is essential to the rollout of 5G, which is an Obama Administration priority.

To that end, he proposed an approach to revamping BDS (formerly "special access") regulations that can apply to either the historically rate-regulated incumbents like AT&T and Verizon, or to competitive carriers and new entrants like cable broadband providers,

Wheeler has billed it as a tech-neutral remake of the old dominant vs. nondominant regime to spur competition wherever the FCC finds it insufficient.

The goal is to promote more competition, competition, competition (the chairman's mantra) for business services, which could include price regulation on cable service where the FCC concludes it does not face competition.

Not surprisingly, cable ISPs weren't hot on the idea that having encouraged them to enter markets to compete with incumbents, they might now be rewarded with new rate regs.

The FCC proposal is rooted in a compromise offering from ILEC Verizon and CLEC group INCOMPAS. Wheeler has argued that a BDS revamp is needed for the competitive backhaul pricing for 5G and thus is a key to the universal wireless coverage that is an Obama Administration priority.

Sprint was fine with the proposal. "For well over a decade, the high-capacity broadband marketplace has suffered from a lack of competition, costing the American economy billions and slowing investments in next generation broadband technologies," it said in a statement. "Today Chairman Wheeler took an important step to reform this broken market.  We look forward to learning more about the item and continuing our work with the FCC to promote competition and ensure just and reasonable prices for all parts of the BDS marketplace."

Verizon appeared happy as well.

"Verizon is pleased the FCC is moving forward with an order that includes aspects of Verizon and INCOMPAS’s joint proposal, including creating a consistent framework that applies to all competing providers and services," said Will Johnson, Verizon SVP of federal regulatory and legal affairs. "We believe the Verizon/INCOMPAS compromise proposal was a significant step in that direction. We will continue to work with the FCC and the industry on ways to reach a balanced solution."

AT&T was definitely not happy with the decision to continue ex ante regulation of incumbents while taking a case-by-case approach to new entrants.

“This proposal is little more than a wealth transfer to companies that have chosen not to invest in last mile fiber infrastructure. It will result in less fiber investment and contribute to mounting job losses at a time when our country needs just the opposite.

“Like its privacy and set-top box counterparts (which may or may not also be voted upon in three weeks), the special access proceeding seems designed to pick winners and losers rather than being an even-handed analysis based on facts and sound economics.

“While the Commission has correctly determined (for the time being) not to re-regulate the Ethernet market, there is no evidence in the record to support the Commission’s proposal to re-regulate all legacy TDM-based service without regard to the number of competitors operating in a markets. To reach such a preposterous conclusion, the Commission had to ignore facts and virtually all of the economic analysis submitted by its own ‘independent’ economist as well as all of the other economists who provided analysis in this proceeding.”

More than a dozen members of the Congressional Black Caucus have called on the FCC to use "“all available data to recognize and support competition where it has developed, especially as additional providers have entered the market in recent years."

That came in a letter to FCC Chairman Tom Wheeler on his proposed revamp of business data services (BDS) the commercial broadband services in which the FCC will regulate new entrants and incumbents alike wherever the FCC decides there is insufficient competition.

The members are concerned that the FCC may not be considering all of the data.

The letter praises Wheeler for his efforts to improve broadband access, something he has said his proposal will do. But they also urge the FCC to use "all available industry data" to support competition where it has already developed, particularly where new competitors have entered the market, and to take into account the real cost of providing service to rural markets.

BDS providers, including new entrants like cable ISPs, have been critical of the FCC proposal as not sufficiently taking those into account, and discouraging new entrants with potential new rate regs after encouraging them to expend the capital to enter new markets.

The letter comes as Wheeler is expected to announce a vote on his BDS reforms at the Oct. 27 public meeting.

Signing on to the letter were G.K Butterfield (D-N.C.), Yvette D. Clarke (D-N.Y.), Bobby L. Rush (D-Ill.), Alma S. Adams (D-N.C.), Joyce Beatty (D-Ohio), Sanford D. Bishop (D-Ga.), Wm. Lacy Clay (D-Mo.), Alcee L. Hastings (D-Fla.), Eddie Bernice Johnson (D-Tex.), Barbara Lee (D-Calif.), Gwen Moore (D-Wis.), Donald M. Payne, Jr. (D-N.J.), Cedric L. Richmond (D-La.), Terri A. Sewell (D-Ala.), Bennie G. Thompson (D-Mich.), and Frederica S. Wilson (D-Fla.).

Comcast says there is no reason for the FCC to start regulating business data services from new entrants to the market, like Comcast, as Verizon has proposed, calling it a cynical, lawless and irrational approach.

In a filing with the FCC this week, Comcast said the marketplace is more competitive than ever and "lends no support to persistent and unprincipled calls for expanding rate regulation, with respect to both incumbent LECs and new entrants like Comcast."

Comcast says that there is "copious" evidence of billions of dollars of investment and declining prices due to competition.

FCC chairman Tom Wheeler is widely expected to put a vote on his BDS regulatory revamp on the agenda for the Oct. 27 public meeting.

If so, Comcast argues that "the only rational course of action for the Commission is to focus on eliminating entry barriers in the BDS marketplace and to exercise restraint in regulating rates."

In a politically divided vote April 28, the FCC approved a Notice of Proposed Rulemaking on what the chairman called a tech-neutral approach.

NCTA: The Internet & Television Assocaition, of which Comcast is the largest member, has called it an unprecedented move to regulate the rates of a new entrant that will threaten the gains cable operator ISPs have made against the incumbents with the lion's share of the market.

The FCC is proposing to phase out the presumption of regulating the rates of historically "dominant carriers" -- the ILECs (incumbent local exchange carriers) -- which had been a way to boost competition from "nondominant" CLECs (competitive local exchange carriers) and from cable competitors, and instead regulate the rates of any of them as it deems necessary. That is in the name of boosting price and service competition for the "special-access"--rebranded by the FCC as "broadband data"--services.

The proposal is rooted in a compromise offering from ILEC Verizon and CLEC group INCOMPAS. Wheeler has argued that a BDS revamp is needed for the competitive backhaul pricing for 5G, and thus is a key to the universal wireless coverage that is an Obama Administration priority.

Comcast says that Verizon's "self-contradictory and arbitrary proposals to extend rate regulation to new entrants without regard to whether they possess market power would undercut core policy goals, defy decades of precedent, and trample on bedrock administrative law principles."

Comcast also says that Verizon's suggestion that the FCC delay rate regs on new entrants for three years until the FCC has done a planned reassessment of the competitive market is "mere window dressing" since Verizon says after those three years, not matter what the assessment shows, the rate reg benchmarks should apply.

"[R]ate regulation of new entrants cannot simply be 'deemed' the new default state of affairs from which providers may seek relief," said Comcast. "Instead, given that no new entrant is subject to rate regulation today, there must be record evidence justifying the imposition of such regulation."

Verizon declined comment.

Cable ISPs continue to try and convince the FCC that proposals to regulate the rates of new entrants and other competitors to incumbent telcos in the provision of business broadband service are off base, including a proposed market test for competition.

A representative of the National Cable & Telecommunications Association, aided by academics, made the pitch this week to FCC staffers.

The FCC Democratic majority voted this spring to potentially regulate any broadband business service provider, not just the incumbents with legacy positions in plant due to their phone monopolies, based on the presence or absence of competition in a market.

INCOMPAS, representing competitive telcos, together with Verizon, have proposed making four providers with "connections" in a census block the market test for competition.

NCTA says that is "nonsensical," given that in census blocks with any BDS customers over half have only one customer and over 80% have three or fewer customers.

Related: BDS Price Rules Would Cripple Competition

"Such an approach is not a meaningful competitive test, but simply a plea for the broadest possible regulation without regard to competition or costs," said NCTA, according to an ex parte document on the meeting.

It also said that only counting providers with connections to a building is "impossible" to reconcile with the fact that ""competition in the marketplace typically occurs through a bidding process in which providers compete for business in buildings where they have not yet deployed facilities."

A quartet of House Democrats are calling on the FCC not to delay action on its business data services (BDS) reforms and are asking their congressional colleagues to add their voices to that call.

Some ISPs have argued that the FCC needs to take a fresh look at the marketplace (Related: FCC Pressed to Re-Vet BDS Study) in light of some new data, or actually old data not submitted by major cable operators until recently, before acting on the proposal.

A politically divided FCC voted April 28 to propose remaking regulation of the business broadband marketplace and potentially regulating rates for cable operators' BDS (formerly known as "special access") service.

The FCC is phasing out the presumption of regulating the rates of historically "dominant carriers" – the ILECs (incumbent local exchange carriers) – as a way to boost competition from "nondominant" CLECs (competitive local exchange carriers) and from cable competitors and instead regulate the rates of any of them as it deems necessary. That is in the name of boosting price and service competition for the "special-access"—rebranded by the FCC as "broadband data"—services.

In a "dear colleague letter" this week, which is essentially a solicitation of support for their position from other members of Congress, House Communications Subcommittee member Anna Eshoo (Calif.), and Reps. Doris Matsui (Calif.), Peter Welch (Mass.) and Mike Doyle (Ap.) say the FCC already has all the info it needs.

"Chairman Wheeler has stated that reform of this market is essential for promoting competition, benefiting individual and business consumers, and unleashing the true potential of next generation wireless services," they wrote. "During the most recent Energy & Commerce Committee FCC Oversight Hearing in July, he testified that BDS reform is not only important for competition today, but necessary to meet our national priority of leading the world in 5G wireless services.

"The time has come for the FCC to use the extensive data collected over the last several years to undertake competition-based reform of the BDS market in urban and rural areas alike.  We commend Chairman Wheeler for his leadership on this important issue."

Cable operators are not happy with the FCC proposal, which would for the first time apply regs, including potentially rate regs, to all players in the BDS market, not just the incumbent telcos who have dominated access to the business lines and have been required to provide access on reasonable terms and conditions to new entrants like cable operators. Those cable operators say that the reward they get for building out plant is to get regulated like an incumbent.

The letter came only a couple of days after a group of Senators (and one independent) urged the FCC to factor in more recent cable information into their calculation for revamping its rules, though they did not say that would necessarily delay the process.

The FCC collected data from stakeholders on the BDS marketplace for several years before releasing the first report, which it used to buttress its case for BDS reforms. It only recently put out the peer reviews. But cable operators had to submit some new data and the report was tweaked and re-released along with the new data. That came on the same day initial comments were due on the BDS proposal based in part on the report.

CenturyLink and the others say that should warrant new peer reviews of the report, which should then be put out for comment.

Add CenturyLink, AT&T Inc., Frontier Communications, FairPoint, Consolidated Communications, and Cincinnati Bell to the list of those who want the FCC to revisit its business data services (BDS) decision.

Actually CenturyLink et al. were already on the list. They have just redoubled their efforts as the July 26 deadline approaches for final comments on the BDS decision, which was billed as a tech-neutral approach to regulating business broadband (formerly "special access") (http://www.multichannel.com/news/fcc/wheeler-proposes-tech-neutral-speci...).

That came in a second request from the incumbent telcos for the FCC to strike a report on the business data services market (the so-called Rysman Report) and conduct new peer reviews of the revised version of the report.

The FCC collected data from stakeholders on the BDS marketplace for several years before releasing the first report which it used to buttress its case for BDS reforms. It only recently put out the peer reviews. But cable operators had to submit some new data and the report was tweaked and re-released along with the new data. That came on the same day initial comments were due on the BDS proposal based in part on the report.

CenturyLink and the others say that should warrant new peer reviews of the report, which should then be put out for comment.

"These steps are not discretionary," they told the FCC, "but rather mandated by the Administrative Procedure Act (APA), the DQA, and basic notions of procedural due process. Failure to take them would preclude reliance on either the original Rysman paper or the revised analysis in any final Commission order...As it now stands, the current version of that report has not been subject to such review, and parties have been unable to comment on any such reviews. If the commission does not take such steps, it cannot rely on the Rysman Report or the Revised Rysman Report in any final decision."

CenturyLink and Frontier have teamed up with a handful of other telcos in a new coalition to push back on the FCC's proposed reforms of special access market.

That is the business services market the FCC has rebranded BDS or business data services).

Also in the coalition are Cincinnati Bell, Consolidated Communications, and FairPoint.

Special-access lines are dedicated connections used by businesses and institutions to deliver voice and data traffic, including for ATMs and credit card transactions. They also include wireless backhaul services, so the move also ties to the FCC's promotion of wireless broadband.

The coalition, dubbed "Invest in Broadband for America," called the FCC proposal sweeping and questionable--it is also being questioned by cable operators providing BDS competition.

They are the same companies that joined with AT&T to challenge the FCC proposal, saying it was based on flawed data provided by cable operators (part of an FCC data request on the state of the marketplace, which it used to buttress its case for expanding regulation of the marketplace where "necessary" to promote competition).

“First and foremost, it is crucial that the FCC get the data right on competition in the marketplace before flying blindly into a major policy decision,” said John Jones, CenturyLink SVP, in announcing the new effort. “Important decisions are best made with accurate data.  What is at stake here is the definition of ‘competition.’  That definition will have a substantial impact on the telecom and national economy for years to come.  Think investment, suppliers, employees, infrastructure and contractors.”