FCC set to cut legacy wholesale broadband prices, oversee faster services

11 October 2016 by Steve Blum
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Competitive split.

There’s a 45 Mbps divide in the wholesale bandwidth business, and the Federal Communications Commission is preparing new and separate regulations to address both sides. It’s one of the three key issues that chairman Tom Wheeler promised the cell phone industry he would address to clear the path for deployment of 5G technology, the other two being spectrum and local restrictions on wireless sites.

In a summary – Wheeler doesn’t release drafts of new rules to the public, preferring instead to limit his conversations to industry stakeholders – he described prices for (mostly) legacy broadband services at 45 Mbps and below as “artificially high” and outlined a plan to first cap current rates and then chop them over time, by as much as 20% in the next the three years alone.

There’s something like a market, though, at higher bandwidths, he says

For packet-based services and circuit-based services above the level of [45 Mbps], there is evidence of emerging competition and falling prices. New entrants include cable companies that, with their already ubiquitous networks, are primed to challenge incumbent [telephone companies]. In addition, revenues from high- bandwidth offerings enable competitive [telephone companies]…to deploy their own networks to serve the most attractive customers.

Instead of directly regulating prices, Wheeler proposes to reaffirm “that, with rare exceptions, providers, including packet-based Ethernet providers, are common carriers and as such need to deal on reasonable and nondiscriminatory terms”. Instead of setting prices in advance, he falls back on his version of “light touch” regulation, which is to let companies play the game as they please, with the FCC standing in the middle, acting as a referee. It’s a lawyer and lobbyist-centric approach and one that Wheeler, a former top lobbyist for both the cable and mobile industries, favors.

The new rules could appear at any time. Instead of a formal vote at a public meeting, Wheeler is privately circulating the full text of the rules among his current colleagues. When at least two other commissioners sign off on it, it’s a done deal. Then, and only then, do we get see what it says.