Amidst overseeing the transition from legacy
telephone services to all-IP networks, why would the FCC put competitive
broadband services back under legacy telephone regulations? Or rather, why
would it single out one provider of broadband services for legacy regulations?
Regrettably, that’s exactly what the FCC is doing when it comes to
CenturyLink’s broadband enterprise services.
Just this month the FCC took public comments
on a proposal to keep those services under the thumb of last-century telephone
regulations. But forward-looking communications policy should reflect
technological advancements and competitive market realities. And just administration
of those policies should scrupulously avoid disparate treatment of market
participants. The FCC’s proposal fails on both accounts.
The enterprise broadband market is highly competitive. There are
no dominant carriers. CenturyLink’s rivals have long since been granted
forbearance from dominant carrier rate regulations and Computer Inquiry tariff
requirements. Straightforward application of FCC precedents calls for
forbearance relief from dominant carrier regulations for CenturyLink. At long
last, the FCC should grant CenturyLink forbearance from those outdated
regulations, and stop singling it out for disfavored regulatory status.
Enterprise broadband services offer high data speed and capacity
capabilities through Ethernet and other IP-enabled technologies. Such services
are highly sought after by enterprise customers with unique communications and
information technology needs. Enterprise broadband customers are typically
sophisticated and informed, soliciting customized offerings and bargaining with
providers. Nationwide, the
broadband enterprise services market has numerous competing providers, including AT&T, Cox, Charter, Frontier, Verizon, Comcast,
and Level 3.
Through its Enterprise Broadband Orders (2006-08) the FCC expressly
concluded that the market for packet-switched broadband services was
"highly competitive." The FCC likewise recognized that the demand for
such services is sufficient to incentivize deployment and entry by competitors
absent such regulation. The Enterprise Broadband Orders granted Section
10 forbearance relief to several incumbent local exchange carriers (ILECs),
including AT&T, Embarq, Qwest, and Verizon.
The U.S. Court of Appeals for the District of
Columbia Circuit expressly upheld the FCC's analytical approach and granting of
forbearance relief in Ad Hoc Telecommunications v. FCC (2009). As the D.C. Circuit wrote:
"Perhaps an obvious point, but a decision that gives owners of
telecommunications lines more control over access to those lines tends to
increase the incentive for competitors to build competing lines."
Inexplicably, some of CenturyLink's Ethernet and other broadband enterprise
offerings are still subject to dominant carrier and Computer Inquiry
tariff obligations. Those regulations are
a vestige of last-century copper-based local telephone monopoly conditions. Subjection
to dominant carrier regulations hampers Century Link’s ability to offer nationwide
flat-rate pricing options to potential enterprise customers. Corresponding tariff
obligations require CenturyLink to give its competitors advance notice of its
price offerings. This gives competitors a jump in luring away potential enterprise
customers.
With CenturyLink’s marketplace rivals
operating free from dominant carrier constraints, the regulatory disparity is
obvious. For that matter, the FCC’s disparate treatment of CenturyLink’s
broadband enterprise services constitutes an administrative form of unequal
treatment under the law. Court precedents
applying the Administrative Procedures Act's "arbitrary and
capricious" standard hold that federal agencies cannot treat like cases
differently. The same criteria must be applied in an equal manner to all
parties petitioning for regulatory exemptions.
Disconcertingly, the FCC has taken public
comments on its proposal to change the rules on CenturyLink. In particular, the
FCC has proposed to jettison its dynamic, forward-looking analytical framework
from its Broadband Enterprise Orders.
Instead, the FCC would subject CenturyLink’s petition to the same type of telephone
monopoly-style framework set out in the Qwest
Phoenix MSA Order (2010). The FCC plans on issuing an additional data
collection request to coincide with its new approach to enterprise broadband
services.
By over-relying on static market indicators,
narrow market definitions, and misconceptions regarding pricing in networked
services that are highly regulated, Qwest Phoenix MSA Order imposed unjustifiably high hurdles to forbearance relief. Acknowledging it offered no quantitative
analysis, the Order stacked the deck against forbearance relief by
adopting a burden-shifting analytical framework. That is, the Order demanded forbearance petitioners
put forth evidence conclusively proving a negative; namely, that they did not
exercise market power sufficient to keep prices above what the Commission
deemed competitive levels. In that instance, the Order ignored petitioner Qwest’s steep losses in market share to
rivals and excluded any competitive effects from wireless alternatives.
Significantly, the FCC now appears set to
disregard the fact that the Qwest Phoenix MSA Order's framework applied
specifically to legacy voice services, not to broadband services. According
to paragraph 39 of the Order:
Indeed, a different analysis may apply when the Commission addresses advanced services, like broadband services, instead of a petition addressing legacy facilities, such as Qwest’s petition in this proceeding. For advanced services, not only must we take into consideration the direction of section 706, but we must take into consideration that this newer market continues to evolve and develop in the absence of Title II regulation.
Whatever the Qwest Phoenix MSA Order's
shortcomings, the FCC had good reason for recognizing regulatory distinction
between legacy voice services and broadband services. The D.C. Circuit wrote in
Ad Hoc Telecommunications: "Broadband services do not correspond to
the old telephone-cable regulatory divide," and credited both Congress and
the FCC for recognizing that "regulation of broadband can pose different
issues and challenges than regulation of local telephony."
The Broadband
Enterprise Orders recognized
that forbearing from these regulations incentivizes additional investment in
broadband infrastructure and enhances competition in the broadband enterprise
services market. Those precedents better reflects technological advances of the
last decade and today’s marketplace realities. Legacy telephone regulations are
ill-suited to advanced information technologies in dynamic markets. For such markets, the burden should be on the
regulators or pro-regulation parties to offer evidence of market power and
likely consumer harm before government imposes restrictions.
Since the Enterprise
Broadband Orders, those services have been further deployed and the
market has become even more competitive. There is no evidence that CenturyLink has market power. Discarding agency precedents set in its Enterprise
Broadband Orders and
continuing to single out CenturyLink for disparate treatment would be the
epitomize arbitrariness and capriciousness.
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