Regulators Should Take ‘Yes’ for an Answer to Broadband Competition

Wednesday, December 2nd, 2015

Federal Communications Commission (FCC) regulators, purportedly eager to promote competition, keep stifling the investment needed to advance it meaningfully. Case in point, the Commission recently opened a tariff investigation on “special access” rates in the business data services market. For many observers, this political inquiry is unwarranted by the facts on the ground, driven instead by companies whose business models are dependent on government protection for “rent-seeking,” or ongoing access to the networks that others built.

The market is working; with every passing month, evidence of real competition in ethernet and business services grows. Telcos, fiber over-builders, wireless players and cable companies are all investing to better compete for business customers.

Cable companies have spent billions upgrading networks that extend deeply into neighborhoods and commercial areas, so their expansion into this space makes sense. In a telecommunications industry characterized by cross-platform competition, successful players must upgrade their networks and use them to their full extent. Cable is working to prepare for DOCSIS 3.1, gigabit to the home, and developing higher speed offerings for all types of customers. They see synergy with their existing interests and want to take advantage of economies of scope and scale to serve business customers.

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Indeed, Comcast now boasts that its business services revenue “grew 21.4% to over $1.1 billion” targeting “businesses of any size;” Time Warner claims “just north of 30% growth in its wholesale transport business” while increasing capital expenditures focused on commercial buildings; Cox (which plans to offer gigabit service in all its markets by the end of next year) reports “double-digit growth again in the wireline last mile;” and Charter recently announced its plan to continue to expand “the footprint of [its] serviceable enterprise area” to serve more businesses. A FCC filing even noted that “[t]he enterprise-focused units of the nation’s largest cable operators-Time Warner Cable, Comcast, and Cox-are now the fifth, sixth, and eighth largest providers of ethernet services in the United States, respectively.”

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Another reason cable is moving into business data services now, and another sign of healthy competition, is presented by Google. Bernstein Research believes that Google Fiber could take up to 40%-to-50% of the market in cities where it will be deployed and could pass 15-to-20 million homes within six-to-eight years — not bad for something Google described as an “experiment.” This expansion will force both the incumbents and cable to respond.

The commission’s new investigation into special access rates gives short shrift to these aggressive competitors and relies on an old vision of the marketplace to protect the business models of a few companies, even as it is supposed to be promoting deployment of ever-faster broadband. Those hardworking crews you see from the road, and that rumbling sound you can feel, represent investment taking place. Competition works and is working in the real world — but it apparently remains unseen and unfelt at the FCC.

According to FCC filings from INCOMPAS — the voice of Competitive Local Exchange Carriers (CLECs) who are dependent on government regulation giving them access to networks that others built — the country needs permanently heavy regulation to preserve competition. Just recently, INCOMPAS CEO Chip Pickering appeared on C-SPAN’s “The Communicators” to note that his trade association arose from the question, “Should we have a big monopoly or open it up to competition?” In reality, there is no such monopoly. INCOMPAS is simply trying to force real competitors making actual investment in infrastructure to subsidize those who are not; it’s choosing to ignore the investments and deployments by new entrants and the competition they offer for business services.

There is no reason for the FCC to put its hand on the scale and select winners and losers by re-regulating the business data services market. The Commission’s investigation is unnecessary and should be shut down now. The “village” is safe and thriving.