FCC Suspends Deregulation But Will Collect Data Later

The FCC has talked about its priority being to drive more and faster broadband to more Americans.  Yet, the FCC’s most recent action does nothing to promote broadband and instead has the potential to divert capital expenditure away from investments in next generation network infrastructure.

On August 22, 2012, the FCC released an order related to special access (business-to-business sales of the higher capacity bandwidth TDM-based copper DS-1/DS-3 that the ILECs provide) that puts a hold on the ability of ILECs to obtain relief from regulations by showing the market for special access in a particular area is competitive while the FCC studies the market through a data request.  Although the two Republican members of the Commission dissented, the order was carried by a 3-2 vote.  A key issue raised by the two Republicans, Ajit Pai and Robert McDowell, is the need for the FCC to create a regulatory environment that gives private firms the strongest incentive to raise and invest capital, particularly in the development and expansion of telecommunications infrastructure.

The FCC’s special access order does not do what FCC Chairman Julius Genachowski promised it would, namely to the address concerns about markets for special access by issuing a mandatory information request of the firms providing special access services.  (Previous voluntary data requests have produced precious little information about the state of the market.) The order does say that the FCC will issue a data request “soon,” but according to Commissioner Robert McDowell in his dissenting statement, “[B]ecause the data collection will be subject to Office of Management and Budget approval under the Paperwork Reduction Act, final resolution of merely the initiation of the data harvest could be months away.  The federal government’s glacial athleticism is on full display.”  Commissioner Ajit Pai, in a separate (and lengthy) dissenting statement estimates that under the best of circumstances there would be no action until 2014 or 2015.

The market is in a state of rapid transformation.  Cable companies are providing significant bandwidth through their Gigabit Ethernet offerings to all types of customers that typically purchase special access.  Wireless competitors T-Mobile and Sprint have indicated they are weaning themselves off the use of DS-1/DS-3 facilities to satisfy their backhaul needs.  Thus, the prospect of the lengthy process of a mandatory data request from all service providers to create new “competitive” triggers for DS-1/DS-3 offerings that are being supplanted by superior alternatives seems unlikely to yield great value to the public, especially given that it may take years for the FCC to conclude this rulemaking. The value of this process is likely small, while it is certain to be costly and potentially disruptive of incentives for investment, particularly if it creates uncertainty not only about the future regulatory environment for currently regulated locations, but also potentially for locations where pricing flexibility has already been granted if new policies allow prior grants of pricing flexibility to be challenged.

This entry was posted on Thursday, August 23rd, 2012 at 6:23 am and is filed under Special Access, Telecom. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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