The FCC is considering CenturyLink's petition for
forbearance relief from restrictions on its enterprise broadband services. In
several instances, CenturyLink's Ethernet and other broadband offerings to
enterprise customers – generally large businesses with major telecom
requirements – are subject to legacy dominant carrier regulations and Computer
Inquiry tariff obligations. But the
competitiveness of the enterprise broadband services market renders such
regulations unnecessary and harmful to innovation and investment.
CenturyLink's petition is important not only for the
regulatory relief it may afford the company but, more broadly, for what it
signals to the market concerning the FCC's regulatory posture. The FCC has a
new opportunity to show it appreciates the need to use its forbearance
authority to accord relief from outdated and burdensome regulations. Too many
times in the past the agency has failed to do so, although it deserves credit
for its recent exercise of forbearance authority with regard to the purchase of
competitive local exchange carriers by cable operators.
Rate regulations and disclosure obligations burden
CenturyLink's ability to offer competitive prices, particularly since its
marketplace rivals have already received forbearance relief. FCC precedents
recognize that forbearing from these regulations incentivizes additional
investment in broadband infrastructure and enhances competition in the
broadband enterprise services market. The FCC should grant CenturyLink's
petition promptly.
Enterprise broadband services are highly sought after by
businesses with unique communications and information technology needs.
Customers in this market are sophisticated and informed, often soliciting
services through individualized requests for proposals and hard bargaining with
service providers for the best deals. Also, the high financial returns from
enterprise broadband services provide strong inducements for infrastructure
investment and competitive entry. The market for enterprise broadband services
is essentially nationwide in its scope with dozens of competitors, including
AT&T, Cox, Charter, Frontier, Verizon, Comcast, TimeWarner Cable, tw
telecom, XO, and Level 3.
The innovative and competitive conditions of the enterprise
broadband services market calls for a deregulatory policy approach. Reducing
regulatory restrictions and relying more fully on market forces offer the best means
of ensuring further economic growth and broadband deployment. Such an approach
fits closely with the deregulatory purposes of Section 706 of the
Telecommunications Act of 1996. That provision expressly calls on the FCC to
use forbearance as a way of reducing barriers to infrastructure deployment for
advanced telecommunications services.
Beneficial economic results would obtain from enhanced
deployment of Ethernet and other broadband-enabled services. Enterprise
customers stand to benefit from improved efficiencies in doing business. And
enterprise broadband services are increasingly being used by wireless carriers
for backhaul transmission of data traffic. Economists have recognized the job
growth and other benefits resulting from upgrades to new generations of
wireless networks. Backhaul facilities are a critical input for those wireless
services.
But as things stand today, some of CenturyLink's enterprise
broadband services remain subject to dominant carrier regulations and Computer
Inquiry tariff obligations. (In particular, such regulations still saddle
CenturyTel-affiliated sevices as well as some Embarq services. Following
mergers and acquisitions, those services are now under CenturyLink's umbrella.)
The regulated services at issue are broadband-enabled technologies such as
Ethernet. All this despite CenturyLink not
being a dominant provider. For instance, a Frost and Sullivan estimate ranked
CenturyLink as the 4th largest retail provider of Ethernet services for 2010. A
Vertical
Systems estimate of wholesale Ethernet providers put CenturyLink in 6th
place for 2011.
Dominant carrier regulations restrict the ability of
CenturyLink to offer flat-rate pricing on a nationwide basis to potential
customers and undermine CenturyLink's flexibility in putting together deals.
Tariff obligations require CenturyLink to give the public advance notice of its
price offerings, giving rivals a jump in luring enterprise customers.
Even worse, CenturyLink must operate at a competitive
disadvantage in this lucrative high-tech market because its rivals are allowed
to operate free from similar regulatory constraints. CenturyLink's rivals once
subjected to dominant carrier and tariff obligations for their respective
enterprise broadband services have already obtained the forbearance relief that
CenturyLink now seeks. Between 2006 and 2008, the FCC issued a series of
forbearance orders regarding such services that can collectively be referred to
as the FCC's "Enterprise Broadband Orders." Forbearance relief, or at least partial relief, was granted to
AT&T, Embarq, Qwest, and Verizon.
In its Enterprise Broadband Orders the FCC expressly concluded that the market for
packet-switched broadband services was "highly competitive." Those
orders likewise recognized that the demand for such services is sufficient to incentivize
deployment and entry by competitors absent such regulation. And ultimately, the
FCC concluded that national market conditions and trends satisfied the criteria
for forebearance relief set out in Section 10 of the Communications Act. That
is, in those orders the FCC concluded that: (1) regulation was not necessary to ensure availability of services at just
and reasonable rates and on a nondiscriminatory basis; (2) regulation was not necessary to protect consumers; and (3) forbearance
was in the public interest.
These considerations add up to a strong case for granting
CenturyLink's petition. To recap:
- Granting forbearance relief would encourage further marketplace competition and investment, fulfilling Section 706's directive that the FCC use forbearance to remove regulatory barriers to deployment of advanced telecommunications services like enterprise broadband services.
- Regulatory forbearance would give CenturyLink needed flexibility to bargain with customers at arms-length. CenturyLink's competitive prospects would likewise be improved without tariff obligations continuously undercutting it.
- Forbearance relief would end the disparate treatment for enterprise broadband services, resulting in regulatory parity for CenturyLink.
- FCC precedents also support forbearance relief for enterprise broadband services, recognizing that deregulation will further unleash the competitive forces already at work in the market, leading to increased investment in broadband infrastructure.
Again, while CenturyLink's case is
persuasive, so is the case for the FCC's broader use of its forbearance
authority. Hopefully, the FCC will be more receptive than it has been in the
past to exercising its forbearance authority – as Congress intended – to cease
applying regulations that are no longer necessary.
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