Important Special Access Service Regulatory Changes

[featured-text]Digital technology has become the norm in our communications infrastructure and the internet has become a driving force in our economy.[/featured-text]

As many of the activities that once took place in physical space now take place in cyberspace, enterprises depend more than ever on the underlying communications infrastructure to support those activities across local and increasingly remote sites. Substituting digital communications for physical interactions has lowered transaction costs and increased economic efficiency, but these services are not free. This thought has been concerning the FCC for some time now.

Communication networks have real costs for the businesses that use them as intermediate “transport” inputs to produce and deliver their output — and those costs don’t disappear just because they are internet-driven. They are recovered from end users in the prices they pay for the goods and services they buy. Nowhere is this more problematic than in the  case of special access services.

Most businesses do not realize that “special access” is a regulatory term for these business connections. These were the first telecommunications services deregulated by FCC action after the passage of the Telecommunications Act of 1996. Unfortunately, the FCC missed the boat on their initial notion that this service would be competitive. What happened is that the special access market never became competitive because you can’t deregulate a critical communications input on the presumption that everyone will play nicely.  Accordingly, the FCC has been collecting comprehensive data since that time, and has determined that the special access market is NOT competitive and the broadband business and wireless markets will suffer if they don’t fix it.

As a result, new regulatory changes are happening more quickly than usual at the Federal Communications Commission. Tom Wheeler, chairman of the FCC introduced massive changes on how data services will be handled in the future both from a business and financial perspective. He also introduced a “Further Notice of Proposed Rulemaking” that calls for public comment on how best to construct the new regulatory framework. On the FCC’s website under the title Out with the Old, In with the New, it’s clear that massive changes are coming to the multi-billion nationwide business data services (BDS) or special access market, which is owned by the usual suspects such as Verizon and AT&T.

The problem with old plans is that these charges lock enterprises to their current providers by cutting into the savings achieved from switching to competitors. After research we also discovered that the FCC is eliminating a tactic known as “tie-ins” where broadband providers would offer service to a business customer in one part of the country only if that customer also bought service in a different region. Comcast is notorious for this little tactic…

It also opens up a process to create new rules that will allow the FCC to impose pricing regulations on markets it sees as uncompetitive. They are looking at the following considerations:

• The number of providers in an area
• The speeds that are offered
• Sufficiency of service to meet the needs of different businesses in the area
• Applying to cable companies that are a relatively new competitor in the market for business broadband

It’s not 100% clear where things will wind up but you can be sure we will be following it closely!