On November 7, 2016, Jonathan Banks and the undersigned of USTelecom met separately with Claude Aiken, Legal Advisor to Commissioner Clyburn, and Travis Litman, Senior Legal Advisor to Commissioner Rosenworcel. We discussed certain aspects of Chairman Wheeler’s recent proposals for regulating the business data services (BDS) marketplace.
With regard to Ethernet services, we reiterated that multiple regressions and other data in the record provide no evidence of market power on which the Commission could lawfully regulate prices for Ethernet at any speed, and further stated our agreement with the decision not to impose ex ante pricing regulation on Ethernet services either directly or indirectly through conditions or other mandates that limit providers’ ability to charge market-based rates.
With regard to TDM-based legacy services, we and others were caught off guard by the absence of a competitive test in the Chairman’s proposals to determine where to impose price cap regulation. We explained that the Commission cannot justify imposing new pricing rules everywhere indiscriminately, given ample evidence of BDS competition in the record, and the Commission’s previous determinations (e.g., in the UNE and pricing flexibility proceedings) that BDS is competitive in some areas of the country. We described the two-competitor test put forth by USTelecom and others, and suggested that it could be used to direct regulation only to areas that lack competition on an interim basis until the Commission can seek additional data in a Further Notice to establish a competitive test.
We also questioned the Commission’s basis for regulating transport prices as part of its price cap reform. As an initial matter, claims that channel terminations to end users and transport services (which connect circuits and other points of presence) cannot be separated for purposes of price cap regulation are simply untrue; the Commission has for years regulated them as separate BDS components, imposing different pricing flexibility rules on each accordingly.