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FCC shakes up $45B special access market

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FCC shakes up $45B special access market

The FCC is looking to shake up the $45 billion business dataservices market.

Following an investigation of current business data services,also known as special access, the FCC said April 28 that certain terms and conditionsof existing special access tariffs filed by four major telecommunications companies— AT&T Inc., , and — were foundto be unjust and unreasonable. According to the commission, these tariffs hurt facilities-basedcompetition and inhibited the transition to new technologies.

According to the FCC, the four aforementioned ILECs must withdrawthe illegal terms of their tariffs and file new ones within 60 days.

In tandem with this order, the FCC issued a further notice ofproposed rulemaking looking for information and commentary on how to best replacewhat it called the "fragmented and outdated rules" that currently governthe special access market.

"The fact is — our current approach is badly, badly outof date," FCC Chairman Tom Wheeler said in a statement. "In fact, ourways of measuring [business data services] competition are so old-fashioned thatthe commission actually stopped using its own test — four years ago. Four yearshave gone by and the marketplace is changing." 

First, the FCC plans to survey current marketplace conditions,including the location of current infrastructure and which marketplaces are morecompetitive than others. In those marketplaces where competition is healthy, theFCC is looking for comments on a set of deregulatory measures that allow the commissionto maintain minimal and reasonable oversight. For noncompetitive markets, the FCCis seeking comment on a tailored set of rules to safeguard customers, includingthe use of price regulation and the prohibition of certain tying arrangements thatcould harm competition.

The FCC is also seeking comment on proposals that tariffs shouldnot be used in the future as part of the regulation of broadband data service, regardlessof competition, and that companies should remain free from nondisclosure agreementsthat prevent them from providing information to the commission. Among other things,the commission is also considering eliminating the existing exemption for certainVerizon services from the basic provisions governing just and reasonable offeringsof telecommunications services.

In considering these proposals, the commission said it is beingled by four principles: fostering competition; technological neutrality; removingbarriers that impede the transition to new technologies; and finally, making rulesthat suit the needs of both today's and tomorrow's marketplace.

"I have made plain — again and again — the importance ofcompetition," Wheeler said. "Competition means that consumers are betteroff; that our economy gets stronger and — very importantly — that government cantake a backseat to the marketplace. I have made equally plain that, where competitiondoes not exist, then government has a job to do — protecting consumers and competition."

Not all of the commissioners, however, agree with Wheeler onthese points. Specifically, Republican Commissioner Michael O'Rielly said he feltthe proposal was overstepping.

"This is plain, old-fashioned rate regulation, repackagedwith a new narrative," he said in a statement. "One of the best ways toensure that providers invest to meet the growing demand for backhaul is to freethem from legacy rules that hamstring competition. We cannot regulate our way todeployment."

He added that if the FCC continues down its current path, anyrules or regulations it adopts will likely be challenged and overturned.

"These are agreements between sophisticated and well-representedbuyers and sellers," he said. "Those purchasers, in turn, serve some ofthe largest banks, health care providers, and big box retailers in the country.It is hard to see the need to intervene in contractual disputes on behalf of someof the major companies represented here, and I am surprised that this is the positionof the commission."

The major users of business data services include banks and retailersconnecting ATM machines and credit card readers, government and corporate usersconnecting branch offices and data centers, and mobile phone providers off-loadingcalls and data from wireless networks.