CLECs Push Hyperbole-Driven Policy for Business Broadband

Friday, March 11th, 2016

To justify favors from the Federal Communications Commission, a segment of the business broadband industry is distorting the economic realities of the marketplace.

The latest example comes from Level 3, a multibillion dollar international telecom company. In a recent blog, Level 3 implores the FCC to regulate the terms and prices of business broadband so that it can more cheaply lease from its competitors the network connections to businesses and cell towers, rather than building its own connections.

Level 3 justifies its favor-seeking by claiming that its competitors have a “monopoly” on such connections. The claim is absurd on its face and rings especially hollow coming from Level 3, which happens to be the No. 2 provider of businesses Ethernet services in the U.S. with one of the largest fiber networks in the nation and the largest Internet backbone in the world. It is understandable that the term “monopoly” has a certain superficial appeal. It might have been closer to the truth if referring to the state of the marketplace 20 years ago, but policymakers must see through hyperbolic rhetoric and make policy decisions based on facts as they exist today.

The facts in this case show that business telecom markets have been open to competition for several decades and competition is thriving. Competitors continue to deploy their own fiber network facilities for transport, wireless backhaul, and increasingly last mile connections to business locations. In recent years the cable industry has moved aggressively into the business broadband marketplace, where it already passes at least three-quarters of businesses with its own network facilities.

Cable operators have invested $14 billion and competitive fiber providers have investment $30 billion since 2009 to expand business broadband networks. As a result of direct facilities investments, competitively supplied Ethernet service is rapidly displacing legacy business broadband services, with Ethernet now comprising two-thirds of business broadband revenues. In this growing segment of the marketplace, several of the alleged “monopolists” had a combined share of only 42 percent of business Ethernet ports in 2014, down from 61 percent in 2005. In the same period, cable share of Ethernet ports grew from 6 percent to 26 percent. No one provider had a share greater than 20 percent.

Contrary to Level 3’s claims, the competitive investment, technological innovation, and – most obviously – market share shifts that we see with business broadband simply don’t happen in “monopoly” markets.

By Patrick Brogan, USTelecom