Newest regulation from the FCC raises ire from INCOMPAS

Last week the FCC voted two to one to eliminate price caps for business data services (BDS) provided by phone companies like AT&T, Verizon, and CenturyLink.

The FCC has historically limited the prices companies like AT&T can charge on services to businesses delivered over copper-based TDM networks. This is, arguably, one of the most controversial decisions Chairman Pai has ruled on since being appointed in January. Organizations as diverse as the Small Business Administration, the European Union, and INCOMPAS have expressed their dissatisfaction about the ruling.

As an overview, the price caps for BDS were long expected to expire. Those opposed to Pai’s actions aren’t generally opposed to removing the price caps, they’re opposed to how the caps were removed. Most industry leaders, lobbying organizations, and the previous FCC advocated for a three-year gradual process of expiration. A longer repeal process would do two major things: allow competition to enter markets and avoid immediate price increases.

Competition or monopoly?

A gradual repeal of the caps could allow time for additional providers to enter markets and bring competition. The FCC, in its decision last week, argued that as long as there is at least a second ISP within a certain distance, then there is enough “potential for” competition. In other words, if a rural hospital only has access to one ISP but there is another provider within a few miles, the FCC believes that the price cap repeal will encourage that second ISP to expand and eventually serve the rural hospital. Opponents believe this effectively creates monopolies, or at best duopolies, in many regions around the United States.

INCOMPAS CEO, Chip Pickering, released comments after the decision was made. “The pro-monopoly FCC just voted to kick American small businesses where it really hurts, in the wallet. The FCC is out of touch with consumers, out of sync with businesses and out of step with our nation’s internet infrastructure goals. We must build faster, more affordable networks of the future. But the FCC’s one is enough monopoly policy threatens to end decades of innovation and hinders the streaming revolution.”

Instant price increases

Those who oppose this newest FCC action believe it not only encourages monopolies, but that it will also result in near-instant price hikes for businesses that are already struggling in rural or poorer communities. “Done right, reforming BDS could bring more competition and provide time for a sound technology transition to faster networks. Done wrong, it will shock business customers, raise prices, and chill investment.”

In her dissent, Commissioner Clyburn highlighted the opposition’s views on price impacts: "What this order does is open the door to immediate price hikes for small business broadband service in rural areas and hundreds of communities across the country. Cash-strapped hospitals, schools, libraries, and police departments will pay even more for vital connectivity."

After lobbying the FCC to remove the price caps, AT&T increased prices 15% the day after the FCC decision. The worries of those in the opposition were proven correct. Pickering of INCOMPAS notes, “outside of the FCC, and a handful of AT&T lobbyists, there is not a single person on the planet who believes we currently have enough broadband competition. Prices are going up, and customer service is going down. That doesn’t happen in free markets with competitive choice.”

What’s next

The FCC has made a large number of decisions since February. However, none have come with such bipartisan fervor as this decision. It’s been panned by both conservative and liberal politicians and business leaders, because it seems to favor large, incumbent corporations at the expense of competitive choice, price, and small businesses across the United States.