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Ajit Pai's BDS Proposal Draws Mixed Reviews

FCC chairman Ajit Pai's proposal to deregulate business data service (BDS) rates—credit card readers, ATMs—of incumbent carriers and not to impose potential new price regs on competitors including cable ops was drawing a lot of attention in Washington after the chairman signaled the FCC would vote on his BDS item at the April meeting.

Former chairman Tom Wheeler ran out of time and support for his BDS revamp, which Pai had issues with. A notice of proposed rulemaking (NPRM) under Wheeler was adopted along party lines, but the order was never voted. Pai’s item would be an order based on what he said was lengthy data collection and the input into that NPRM, though critics of his plan were suggesting it was sufficiently different from the NPRM that it should be put out for new comment. 

"On the heels of the largest data collection in the history of the FCC, the order proposes a data- and economics-driven regulatory approach that best reflects the level of competition that exists today (though the market is likely significantly more competitive than even this data – from four years ago – reflects)," blogged Bob Quinn of AT&T, one of the incumbent providers getting deregulated. "The proposal appears to eliminate outdated regulations that hinder competitive markets, and proposes a rational regulatory framework where competition has yet to take hold. There can be no argument that this reform is long overdue."

Well, there could be from some quarters. 

INCOMPAS, which backed Wheeler's more regulatory approach, was not happy. 

INCOMPAS CEO Chip Pickering called it a "competition killer," a gift to broadband and a swift kick to consumers.

"Chairman Pai is taking an already broken broadband market, where 86% only have one choice for services at 50 Mbps and below, and making it worse. Based on past experience, this proposal will slap on average a 25 percent broadband price hike on small businesses, and a hidden monopoly tax on American businesses and consumers who will pay more every time they use an ATM machine or gas pump."

“This is crony capitalism that favors broadband giants, is anti-business, and kicks consumers," he added. "Pai’s proposal is the exact opposite of the pro-competition doctrine championed by the Trump Administration and promoted by Republican leaders on Capitol Hill who have made increasing competition central to health care, insurance and education reform. One-third of the counties in the U.S. have only one health care provider. The business broadband market is even worse where more than three-fourths of business locations have only one provider." 

Given what he said was the radical difference between Pai's BDS approach and that of his predecessor, he said the new proposal should get "a full public comment period and an updated open and transparent review of the data taking into account recent market consolidation that impacts business customers from significant competitive providers, including Level 3, XO Communications, and EarthLink."

Scott Cleland, of the ISP-backed NetCompetition, was pleased. 

“Kudos to FCC Chairman Pai for clearly understanding the business, economic, and investment, realities and challenges, of multi-billion dollar private investments in infrastructure; and purposefully organizing the FCC to better encourage broadband infrastructure deployment quickly to be part of the solution to America’s economic growth and job creation needs," he said. 

“Chairman Pai knows one of the best ways for the FCC to promote private investment in infrastructure and advance 5G broadband innovation is to encourage facilities-based broadband competition in the business market, by permanently stopping FCC rate regulation of the long, fully-competitive, fiber-based, business data market, and ending most all FCC rate regulation of the antiquated copper-based business data market, except in the minority of counties or areas where there still may be insufficient competition.” 

Brickbats were the order of the day from the Consumer Federation of America, which called the proposal "bonanza for behemoth corporations" and a "blatant and direct example of crony capitalism that will harm consumers….The FCC’s extensive data gathering shows that the vast majority of consumers (over three quarters) are served by a single supplier. An additional twenty percent were served by a duopoly.  And the competitive market has been consolidating since the data was collected, with the incumbent telcos buying XO Communications, Level 3, and EarthLink."

The Pai proposal suggests that "nearby" competition can fill the bill, saying "we determine nearby competitive network facilities exert competitive pressure on incumbent LECs whether or not their network is within a half mile of a customer’s location," and that a duopoly has a "substantial competitive effect."

Another consumer group saw it differently.

“The American Consumer Institute Center for Citizen Research applauds Chairman Pai and the FCC for taking a positive step towards a more competitive and vibrant BDS marketplace," said Steve Pociask, president of the institute. "The FCC’s prior rate regulations imposed on incumbent local exchange carriers provided no to "benefit consumers, businesses, broadband build-out and the economy. In fact, setting artificially low rates hinders infrastructure deployment of broadband services and reduces market competition in the very communities where price controls were designed to benefit. 

"The previous rate controls were based on the false assumption that competition and investment could never flourish in the BDS marketplace, particularly in rural areas. The FCC’s new order recognizes that this is not the case. Today, these markets exhibit heightened market rivalry. Consequently, easing the regulatory burden on BDS companies and modernizing the rules involved will bring market forces to bear and allow competition to drive investment and innovation in the BDS sector to the benefit of consumers."