TMI_Logo.pngAt its Open Meeting this morning, the FCC adopted a Further Notice of Proposed Rulemaking aimed at protecting and advancing competition in the $45 billion market for business data services, formerly called special access services.   The FCC also adopted an Order resolving an investigation of existing special access tariffs filed by AT&T, Verizon, CenturyLink and Frontier.

Further Rulemaking

The Rulemaking seeks comment on reforming and modernizing rules for business data services based on four principles:

  • Competition is best, but where competition does not exist, market conditions must not be allowed to stifle the ability of business customers to innovate and compete
  • Technological neutrality should be at the core of any new regulatory framework
  • Policies should remove barriers to the transition to new technologies
  • Rules should be crafted to meet the needs of both today’s and tomorrow’s marketplace.

fcc_front_doors-resized-600.jpgSpecifically, the Rulemaking seeks to replace the existing rules with a new technology-neutral framework that classifies markets as either non-competitive or as competitive.  It seeks comment on a new, data-driven competition market test to identify areas where competition likely exists and seeks comment on the key elements of that test.  The Rulemaking also:

  • Identifies and seeks comment on a set of de-regulatory measures in competitive markets, maintaining minimal oversight to ensure that the provision of telecommunications services is just and reasonable;
  • Identifies and seeks comment on a “tailored set” of rules to safeguard customers in noncompetitive markets.  This includes the use of price regulation (apparently, price caps for legacy services and “anchor pricing” or benchmarking for IP based services), as well a prohibition of certain tying arrangements that harm competition;
  • Seeks comment on the appropriate treatment under this framework of the three types of contractual terms identified in the Tariff Investigation Order (see below), as well as other contractual terms and conditions that have been subject to public comment;
  • Seeks comment on a proposal that tariffs should not be used in the future as part of the regulation of broadband data service in either competitive or non-competitive markets;
  • Seeks comment on requiring that companies be free from non-disclosure agreements that would prevent them from providing information to the FCC; and
  • Seeks comment on a proposed future periodic data collection of a kind that will allow the FCC to update periodically its identification of competitive and noncompetitive markets.

So that the new regulatory framework be applied in a technology-neutral manner, the Rulemaking also seeks comment on a proposal to eliminate the current exemption for certain Verizon services from the basic provisions of the Act governing just and reasonable offerings of telecommunications services.

Tariff Investigation Order

In October 2015, the FCC initiated an investigation into certain terms and conditions in 22 tariff pricing plans for business data services offered by AT&T, CenturyLink, Frontier, and Verizon.  The Order finds that three categories of terms and conditions that were under investigation constitute unreasonable practices under the Communications Act and directs that they be modified or removed from the tariffs.  This includes so-called all or nothing provisions that require customers to make all their purchases from a single tariff plan.  The Order apparently prohibits the use of all or nothing provisions prospectively and seeks further comment on how to implement this finding for existing agreement.

The Order also apparently finds that early termination penalties, assessed when customers are unable to fulfill their volume or term commitments under a pricing plan, are unreasonable to the extent they impose costs on a customer that exceeds the providers’ opportunity costs.  It also finds that they limit a customer’s ability to make efficient choices regarding competition and transitioning to IP services.  The Order directs providers to remove these provisions from their tariffs and resubmit them at levels no greater than the amount of revenue a customer would have paid had it met its minimum commitments within 60 days of release of the Order.



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