Court Upholds FCC BDS Remake

Pai calls it good day for "forward-thinking" regulation
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A federal appeals court has upheld the majority of the FCC's 2017 Business Data Services (BDS) revamp.

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The NCTA--The Internet & Television Association had backed the BDS remake under FCC chair Ajit Pai, who had not supported the previous approach adopted under chairman Tom Wheeler.

In a party line vote, the FCC Republican majority on April 20, 2017, adopted a BDS Report and Order, under Pai, declaring the BDS market generally competitive—a distinct departure from Wheeler's more regulatory proposal, which had concluded the market was insufficiently competitive. The Pai BDS approach deregulated the rates incumbent providers can charge for services like wireless backhaul, credit card readers, ATMs and institutional hookups to schools and libraries.

“It’s a good day for forward-thinking regulation," said Pai of the court decision. "Here’s why: Last year, based on a thorough analysis of a massive amount of data, the Commission adopted a ‘competitive market test’ to determine where regulation of business data services was still needed and where it would impede investment, innovation, and competition. I’m pleased that the Eighth Circuit upheld that test and the detariffing and deregulation of last-mile business data services that the test suggested. Indeed, the court recognized that the Commission had proposed ‘large scale de-regulation’ and repeatedly affirmed the Commission’s policy judgments as reasonable."

Related: FCC Praises Court Decision Not to Delay BDS Reform

The FCC had argued that its new policy of releasing drafts of item three weeks before a vote allowed sufficient time for comment, but the court said that was not the case and remanded that portion of the decision back to the FCC. "The court did identify a narrow procedural issue that the Commission needs to address," said Pai, "and I look forward to working with my colleagues to do just that as soon as possible."

But the court left intact the FCC deregulatory changes, which was a victory for ISPs who had sought more flexibility to deliver business broadband.

“Today’s court decision is a win for consumers and another important step toward modernizing the delivery of broadband services and incentivizing new investment in the most efficient and effective way," said Jonathan Spalter, president of USTelecom. While the transport issue was vacated on procedural grounds, we are confident that upon remand, the FCC will find that transport services are fully competitive and not subject to pricing regulation.

“In no world is one or two broadband providers sufficient competition – we call that monopoly and duopoly for a reason," said Angie Kronenberg, chief advocate and general counsel of INCOMPAS, which challenged the FCC's remake under Pai. "The court’s decision does not change the fact that competition remains the law of the land.“While the court deferred to the expert agency’s review of the evidence and the FCC’s prediction that more competition in the BDS market would be coming, we urge the agency to follow through with a complete analysis of the market in two years," said Kronenberg. "To do so, the Commission needs to ensure it is collecting the right data, which is why INCOMPAS is advocating for reform to the FCC’s Form 477 collection to ensure BDS data is sufficient. INCOMPAS believes that at least three providers offering service over their own last mile facilities are necessary for sufficient competition for fixed broadband."

The Schools, Health and Libraries Coalition (SHLB) focused on the remand of the transport dereg notice as a bright spot.

"We are pleased that the court questioned the FCC's decision to deregulate transport services," said John Windhausen Jr., SHLB Coalition executive director. "Schools, libraries, health providers, and other anchor institutions in rural areas and non-competitive markets are vulnerable to price increases when they have few broadband options. The court's remand will give the FCC another opportunity to examine real world evidence about the impact of transport deregulation on anchor institutions before making a final decision."

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