The Trump Administration took office earlier this year with a clear message: the path forward for economic growth in the United States lies in significant tax and regulatory reforms. While tax reform lies solely in the hands of Congress, the hard work of regulatory reform will need to be undertaken by the resident experts in each office and/or agency. And with today’s circulation of items for the April FCC open meeting, Chairman Pai and his team continue to demonstrate that they are more than up to the task and already delivering on the President’s agenda.
Over the past several years, United States telecom policy has been marked by the FCC placing its thumb on the public policy scales in order to pick winners and losers in the marketplace. In doing so, the agency abandoned the decades-long, bi-partisan approach to promote policies designed to encourage investment in broadband infrastructure. Whether it was the heavy-handed, utility-style regulation of internet services or its equally misguided attempt to make clunky set-top boxes a permanent fixture in consumers’ homes, the FCC repeatedly pursued policies that made the business case for infrastructure investment even more difficult. No Commission proceeding was more emblematic of that shift than Business Data Services – a “catchy” new name for what we lovingly refer to as not-so-special access services.
The then FCC Chairman announced his intent in April 2016 (by leaking his proposal to the press and proponents of its approach before it had even been shared with other Commissioners…but that’s a different story). The proposal called for across the board re-regulation of fiber services offered by incumbents and, shockingly, new regulation of all fiber services offered by any entity, including smaller, competitive fiber entrants, whose services had never been subjected to utility-style regulation. In the end, undercut by many of the conclusions of the independent economist retained by the FCC to examine the competitiveness of the market, the Commission had to scale back its vision and ultimately abandon its approach. The message it was sending to the market, however, was clear: do not invest here; this is a return-free zone.
Today, the FCC circulated a drastically different vision for the Business Data Services marketplace. On the heels of the largest data collection in the history of the FCC, the order proposes a data- and economics-driven regulatory approach that best reflects the level of competition that exists today (though the market is likely significantly more competitive than even this data – from four years ago – reflects). The proposal appears to eliminate outdated regulations that hinder competitive markets, and proposes a rational regulatory framework where competition has yet to take hold.
There can be no argument that this reform is long overdue. The BDS proceeding was opened over a decade ago and, in the intervening years, BDS competition has expanded with the widespread transition to Ethernet services, including on cable infrastructure. And fiber over-builders, looking to leapfrog ahead of legacy services, have entered the market and thrived.
Reforming outdated regulations is not only a key component of economic growth, but some economists argue that it is the most powerful tool for incenting investment and increasing productivity. The BDS rules will finally evolve to reflect the increased level of competition and will encourage incremental fiber investment as the Pai FCC begins the process of delivering on regulatory reform promises made by the Trump Administration.