The FCC’s Business Data Services Order (BDS) became effective on August 1, 2017 after the Eighth Circuit Court of Appeals denied a Motion to Stay the Order filed by Windstream Services, LLC, Ad Hoc Telecom Users Committee, BT Americas, Inc., and INCOMPAS. The Court gave no reason for its decision. 

Although the Order was not stayed, it is important to note that the appeal of the Order itself will now be heard and ruled upon by the Eighth Circuit.  That Court determined that it had the appropriate expertise to review the Order and refused a request that it transfer the case to the more experienced DC Circuit Court.  It is important to note that a court’s refusal to stay an order does not always mean that it will ultimately find the order lawful.  That decision will likely be made on the BDS Order within the next year.

In the meantime, the significance of this Order cannot be overstated.  ILEC DS1 and DS3 special access services are now largely deregulated, based on (in my opinion) a highly suspect competitive market test, in which the presence of only one actual competitor is enough to classify a market as competitive. 

Price cap regulation will still exist, but only for ILEC DS1 and DS3 end user channel terminations in counties that failed the competitive market test and have been classified as non-competitive.

This means in counties deemed competitive and in grandfathered markets that obtained Phase II pricing flexibility prior to June 2017, ILECs such as AT&T, and CenturyLink, are granted almost absolute regulatory relief for their DS1 and DS3 transport and end user channel terminations, including:

• Elimination of the special access rate structure requirements
• Elimination of price cap regulation
• Elimination of tariffing requirements

In non-competitive markets ILEC DS1 and DS3 end user channel terminations are permitted Phase I pricing flexibility freedoms, including:

• Volume and term discounts
• Contract tariffs (but must be made available to similarly situated customers)
• Tariffs changes on a single day’s notice.

A price cap ILEC that was granted Phase II pricing flexibility prior to June 2017 in a grandfathered market must retain its business data services rates at levels no higher than those in effect as of August1, 2017, pending the detariffing of those services.

The industry will now begin a three-year transition to mandatory detariffing of services in competitive markets.  The transition began on August 1, 2017 and will end on July 30, 2020.

For the next 6 months, price cap ILECs must freeze the tariffed rates for end-user channel terminations in newly deregulated counties, if those services remain tariffed.

During this transition, tariffing for deregulated services will be permissive—the Commission will accept new tariffs and revisions to existing tariffs for the affected services.

Carriers that wish to continue filing tariffs under the permissive detariffing regime are free to modify such tariffs to reflect the new regulatory structure outlined in the Order for the affected services.

Both ILECs and CLECs may remove the relevant portions of their tariffs for the affected services at any time during the transition, and the rate freeze does not apply to services that are no longer tariffed. Once the transition ends, no price cap ILEC or CLEC may file or maintain any interstate tariffs for affected business data services.

Current contracts and contract tariffs are grandfathered and not affected by this Order.

However, such contract-based tariffs may not be extended, renewed or revised, except that any extension or renewal expressly provided for by the contract-based tariff may be exercised pursuant to the terms thereof. 

In complex cases, such as the BDS proceeding, we at the CCMI blog normally have mixed feelings.  We can empathize with the arguments of both sides while noting their exaggerations and misstatements.  However, in our opinion, the BDS case is different.  The competitive market test created by the FCC is simply not credible.  Claiming a county is competitive, based on the presence of a single competitor or on the existence of a cable company which might not even be offering a competitive BDS service will lead to higher special access prices for competitive and often captive customers. 

Using potential competition as a surrogate for actual competition was a miserable failure when the FCC used it to grant ILECs special access pricing flexibility, and it will almost surely fail here.  This FCC knows better.  It ought to be ashamed of itself.

By Andy Regitsky, CCMI