BDS Draft Not Expected to Spark Big FCC Fight; RLECs Supportive, Others Quiet So Far

An FCC business data service deregulatory draft isn't looking very contentious as commissioners head toward a planned vote at their Oct. 23 meeting. Stakeholders aren't expecting major changes to the order and two Further NPRMs, though tweaks are possible. Rural telco representatives are largely supportive and no opposition has surfaced so far in the draft's docket.

"We're really happy that we're finally getting some action," said ITTA President Genny Morelli, noting her group and USTelecom petitioned in May 2017 to give model-based rate-of-return rural telcos the ability to opt into BDS incentive regulation. That led to a unanimous NPRM in April (see 1804170025). Morelli is hopeful no opposition will emerge and the Oct. 23 vote can be unanimous. FCC officials and some key industry players didn't comment.

The draft order would allow some rate-of-return RLECs to opt into BDS incentive regulation, with the prospect that price caps would be removed from their last-mile connections in competitive local markets. The FNPRMs would seek comment on giving electing RoR telcos a path to relief from ex-ante price regulation of lower-capacity legacy (interoffice) transport services, and propose to eliminate legacy transport regulation for existing price-cap carriers in response to a court remand.

ITTA voiced "general support" for the draft BDS order in meetings with aides to Chairman Ajit Pai and Commissioner Brendan Carr, said filings (here, here) in docket 17-144, the only lobbying to date. The midsize telco group said RoR carriers eligible to opt into BDS incentive regulation should be given an annual chance to do so, not the draft's one-time opportunity.

“The proposed order is another example of the Commission’s commitment to reducing unnecessary regulations," emailed a USTelecom spokesperson. "This proposed order will streamline regulatory burdens" on smaller rural providers.

RLECs receiving model-based or other fixed high-cost USF support could elect to move their lower-speed -- DS3 (45 Mbps) and below -- TDM-based BDS offerings to incentive-based price caps. Electing carriers' lower-speed TDM-based end-user (last-mile) "channel terminations" would be freed from ex-ante pricing regulation in local markets deemed competitive under a test, while their high-speed TDM-based BDS (above DS3 speed) and packet-based BDS connections would be freed from such regulation outright. They wouldn't have to comply with tariffing, cost-assignment and federal-state jurisdictional separations requirements.

NTCA had backed "this sort of relief and incentive regulation path" as an RLEC option, said Senior Vice President Mike Romano. "By and large, the draft lays out that path." He said the draft competitive market test appears different from what his group proposed but "workable." Romano said few concerns have been raised throughout the proceeding: "That speaks volumes." It's unclear if the relative calm will hold, but if it does, it will be a good sign for the draft, he said. Others were skeptical there would be a big industry fight.

AT&T and Sprint raised concerns in comments on the NPRM, including about an "all-or-nothing" rule and the rate-of-return target for price caps (see 1807030030). AT&T wanted the all-or-nothing rule to apply across electing RLEC study areas and interstate services, but the draft says that rule applies only to existing price-cap carriers. AT&T and Sprint wanted the RoR target set at or quickly cut to a 9.75 percent target, but the draft eyes a 10.5 percent transitional target.

Morelli said such concerns haven't been a "major issue in our discussions" with officials. Some said both carriers have larger issues, particularly Sprint, which is seeking commission and DOJ approval of its proposed sale to T-Mobile. AT&T and Sprint didn't comment.

The first draft FNPRM seeks comment on treatment of lower-capacity TDM transport of electing RoR telcos. It noted competition "may not be as robust in the less dense and more rural study areas that rate-of-return carriers typically serve, compared to the denser and more populated price cap study areas."

Responding to a partial court reversal, a second draft FNPRM proposes to scrap ex-ante price regulation of price-cap carrier TDM-based transport services. While largely upholding a 2017 price-cap BDS deregulation order, a U.S. 8th Circuit Court of Appeals panel ruled Aug. 28 the FCC didn't provide adequate notice under the Administrative Procedure Act of its previous transport price deregulation (see 1808280050). That was a "very minor foot fault," said a cable lawyer, calling it a "foregone conclusion" the FCC will reinstate the TDM-based transport relief.

"I doubt you're going to see much difference from the last proceeding," agreed Phillip Berenbroick, Public Knowledge senior policy counsel. He said the FCC "pretty much got the green light" from the 8th Circuit panel on BDS deregulation.

The APA "is cool," but the underlying statute is "what should command" the FCC on regulation of key BDS "middle-mile" network connections, said Mark Cooper, Consumer Federation of America senior fellow. "You've had an administrative repeal of the Communications Act," that allows "monopoly rents," he said. "The Bells are subsidizing their wireless and broadband networks with core Title II utility services. ... Everyone at the edge is now strangled by BDS." He's not optimistic the FCC will change direction unless a Democratic administration takes over in 2021.