Cable And Telcos Compete For Business Customers

Wednesday, March 2nd, 2016

If the title seems obvious to you, it’s because it is obvious to unbiased observers. In its most recent comments in the FCC ’s proceeding to regulate business communications services (also known as “special access”), the National Cable and Telecommunications Association (NCTA) observed: It “should be clear from the extensive record” that cable operators play a significant and growing role as competitors in the special access market. Though the FCC won’t let the public see its data on business communications services, NCTA notes the “data demonstrate there are two or more facilities-based providers almost everywhere there is demand for special access service.”

Based on the NCTA filing, it appears there is as much or more competition in the market for business communications services as there is in the market for residential broadband services offered to consumers.

This might explain why the FCC won’t let the public see its business data even in an aggregated form that would pose little to no risk of compromising competitively sensitive information: The data would highlight the hypocrisy of imposing new rate regulations on business communication services after FCC Chairman Tom Wheeler repeatedly said the agency won’t regulate rates under the “modernized” version of the Communications Act created by his net neutrality rules.

If there is sufficient competition in the residential broadband market to obviate any need for regulation of consumer broadband rates, how can the FCC justify new rate regulation in the even more competitive market for business communications services?

Under existing law, the FCC can’t justify such an absurd result.

Nearly four decades ago the FCC concluded that, in competitive markets, communications companies “simply cannot rationally price their services . . . or impose terms and conditions [that] would contravene” the core provisions of the Communications Act. This principle — that “competition between two or more facilities based providers is sufficient to ensure that rates will be reasonable under” the Communications Act — has been the law ever since and was the basis for the Clinton-era overhaul of the Act in 1996. In short, the FCC can impose new rate regulations only on providers of business communications services who dominate that market — i.e., that have the ability to charge monopoly prices.

Even the publicly available data is sufficient to demonstrate that there are no “dominant” providers of business communications services in today’s market. The telco-provided special access services the FCC chose to investigate last year account for only 39% of the market for business communications services — well below the level necessary to presume monopoly market power. These telco special access services “are rapidly declining and being replaced by IP-based services offered by both cable providers and [other competitors known as] CLECs.” According to a leading analyst, IP-based business communications services are growing more than 20 percent per year, with telcos representing only one-third of the top tier providers.

Forbes article: Cable and Telcos Compete for Business Customers

By Fred Campbell, Forbes Contributor