Data Confirm Widespread Competitive Investment in Business Broadband

Wednesday, April 13th, 2016

The Federal Communications Commission (FCC) has at last lifted the curtain on certain aggregated data filed in its “special access” proceeding, which is examining the state of competition in business broadband and the effectiveness of the FCC’s current special access regulations. As expected, the data reveal there has been significant and widespread investment to bring competing networks to businesses across the nation. According to a competitive analysis by respected economists at Compass Lexecon:

  • Competitive facilities are available in 95 percent of all census blocks where demand for special access exists.
  • Overall, census blocks with competitive facilities contain 99 percent of all business establishments nationwide.
  • Virtually any area with special access demand in the nation also contains competitive cable company facilities that serve, or are capable of serving business customers.
  • Even setting aside cable business networks, areas with competitive fiber contain 92% of all business establishments nationwide.

In addition to the FCC special access data, USTelecom has submitted data for the record showing ongoing competitive investment in business broadband. For example:

  • Cable and competitive fiber providers have invested $14 billion and $30 billion, respectively, from 2009 to 2015 to provide business broadband services – including approximately $6 billion and $9 billion, respectively, in just the last two years.
  • Since 2013, Comcast announced a major push into the largest enterprise markets in the nation and it has expanded Ethernet and fiber services into approximately two dozen markets.
  • Since 2013, competitive fiber provider, Zayo, has announced at least a half dozen major metro fiber deployments in addition to a series of long haul fiber deployments, anchored by long-term contracts with wireless backhaul customers and data centers. Zayo’s explicit strategy is to target additional follow-on business customers that are on or near the initial fiber deployments.

The FCC’s data from 2013 and data describing subsequent marketplace developments support the conclusion that there is widespread deployment of competitive facilities wherever there is demand for business broadband. But you wouldn’t know it to hear the proponents of expanded special access regulation. Citing heavily skewed data, they decry an alleged lack of competition for business broadband, in order to justify their plea for regulatory favors. Bottom line, they want the FCC to lower the rates they pay to lease others’ business broadband lines. In other words, they want the FCC to subsidize their businesses so they don’t have to build their own lines to connect customers to nearby fiber.

In order to produce favorable statistics, the proponents of expanded special access regulation first prop up a series of false premises and then employ an analytical framework that effectively predetermines the conclusions. First, they define the product market to exclude the most popular cable services even as the cable industry has said “virtually any area with special access demand will contain cable company facilities that service, or are capable of serving, business customers.” Second, they define the geographic unit of analysis to be an individual building, which essentially ignores nearby fiber networks that could be connected with a short extension to the customer premises. Third, their analysis includes in the denominator – while excluding from the numerator – all buildings that have only a cable business service, which they assert is not part of the product market. Fourth, they rely on a static market share analysis that ignores trends of increasing competitive availability, customer connections, and market share gains.

There is ample evidence that some competitors can, do, and will build their own networks in many areas. Lower rental rates sought by some CLECs will devalue existing construction and reduce incentives for expanded construction. Facilities-based competition has been the preferred bipartisan policy since the 1996 Telecom Act opened local telecommunications markets to competition. It has produced sustainable competition and innovation because it embodies incentives to continually upgrade and modernize networks. Superficial competition based on cheap resale may produce near term price cuts, but it freezes existing technology in place and stifles innovation long term. Policy should encourage more facilities-based competition, not limit it.