June 30, 2016 4:45 PM

The FCC's Special Access Special Delivery

Earlier this week, I had a post explaining just how far afield the Tariff Investigations Order portion of the FCC's special access, now "business data services" ("BDS"), Tariff Investigations Order and Further Notice of Proposed Rulemaking ("FNPRM") strayed from rational decision-making.  Unfortunately, since Chairman Tom Wheeler has taken the helm of the FCC, irregular departures from reasoned--and, more importantly, fair--decision-making have become the norm for this proceeding.  

Procedurally Fair?

Yesterday, AT&T posted a statement on its public policy blog once again drawing attention to the lack of procedural due process with which AT&T believes the FCC has conducted its BDS inquiry.  AT&T's Senior Vice President--Federal Regulatory, Bob Quinn provided a detailed description of the Commission's latest procedural irregularity: the Commission's introduction into the record of this 228 page filing containing previously-unseen revisions/critiques/analyses of the work of the FCC's 3d party economic expert--on the same day that public comments were due. AT&T concludes that,  

the [FCC's] lack of due process only reinforces that this agency is driving to reach a pre-ordained outcome.

See, AT&T Public Policy Blog.  AT&T's statement was its second this year (previously here).

AT&T's charges deserve more attention than "ordinary" criticisms of adversely-affected parties, because not only do AT&T's complaints refer to procedural fairness (not whether the FCC agrees with AT&T), and its previous complaint about this issue came 2 months before the company suffered an adverse decision.  Finally, AT&T's concerns--that the Commission is driving toward a pre-ordained outcome--seem to be supported  by independent events (from those cited by AT&T) taking place in the FNPRM proceeding this week.

The INCOMPAS-Verizon Proposal Advances

As mentioned in a previous post, on April 7th, INCOMPAS (the CLEC trade association) and Verizon started combining their BDS regulatory advocacy.  Chairman Wheeler lauded the proposal immediately, as did the most politically influential lobbying/interest group here, and the FCC prominently mentioned the proposal in the first paragraph of its pending FNPRM. See Order/FNPRM at para. 159.
 
Earlier this week, on June 27th, INCOMPAS and Verizon sent in another joint letter  ("INCOMPAS-Verizon June 27th Letter")--elaborating on the parties' previous "compromise" proposal.  Chairman Wheeler seems unlikely to share Adam Smith's skepticism that,

[p]eople of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
Thus, we can expect the Commission to take direction from this second, more specific, appeal for greater regulation.

Despite Contradicting the FCC's Own "Findings"

The INCOMPAS-Verizon proposal clearly has traction with the Chairman's Office, at a minimum.  This is in no way more apparent than in the fact that the principle point of the letter would require the Commission to immediately renounce one of the "key findings" in its FNPRM--yet, the parties feel no obligation to address, or explain, this apparent inconsistency with the market realities, as seen by the Commission.

In its FNPRM, the FCC lists as one of its "key geographic market findings" the observation that,

[p]otential competition is important, that is, nearby suppliers can constrain BDS prices. For example, we find that fiber-based competitive supply within at least half a mile generally has a material effect on prices of BDS with bandwidths of 50 Mbps or less, even in the presence of nearby UNE-based and HFC-based competition.

See Order/FNPRM at para 161.  In other words, the FCC observes that many areas of the country exhibit competitive characteristics, notwithstanding the number of actual competitors offering service in these census blocks.  Instead, the Commission observes, the presence of a potential competitor within a half mile of a building will constrain the prices of every other competitor actually serving the building--even for the smallest capacities of bandwidth (50 Mbps and below).

Compare, however, the "compromise" offered by INCOMPAS and Verizon that,

we agree that all Business Data Services at or below a specified threshold should be deemed non-competitive in all census blocks. We agree that the specified threshold should be no lower than 50 Mbps.
See, INCOMPAS-VZ June 27th Letter at p. 2 (point 2).  And, in case you're wondering what a "non-competitive" designation means, the parties "support ex ante price regulation for all Business Data Services deemed non-competitive." Id. (point 6).  

Thus, while the FCC makes a "key finding" that prices are constrained--even at the lowest capacity levels--without regulation in many parts of the country (notwithstanding the number of actual competitors selling service in these areas), INCOMPAS and Verizon urge the Commission to adopt a nationwide presumption that the opposite is true.  Given the apparent influence of these parties with this Commission (and the undisputed clout of those supporting this compromise), I'd be willing to bet that the Commission ends up believing the advocacy of INCOMPAS and Verizon over "its own lyin' eyes."

***

It's easy to dismiss the protestations of parties that don't prevail in a Commission matter as "sour grapes."  But, it's harder to ignore complaints--before a party has even lost--that they won't get a fair chance to be heard, then the integrity of the system is called into question and we should all be interested.  Finally, concerns about the FCC moving toward a pre-ordained outcome are worse still when any casual observer can notice that some parties have a map to that pre-ordained destination--and others, including the public, are just along for the ride.

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