“Competition, competition, competition” has been FCC Chairman Tom Wheeler’s rallying cry. Under his watch, the Commission’s approach has been, “When competition is high, regulation can be low.” He has stressed that, “[i]f the facts and data determine that a market is competitive, the need for FCC intervention decreases. I have zero interest in imposing new regulations on a competitive market just because we can.”
As the Commission embarks on its review of the Special Access marketplace, it must take these words to heart and avoid imposing harmful and unnecessary regulation on this highly competitive telecom sector.
The facts on the ground show that the dedicated services marketplace (both for TDM-based special access services and for IP-based dedicated services) is competitive and thriving. Competition from cable is both real and rapidly increasing. Traditional competitors are making significant investments in their networks to deploy fiber to customer premises.
Cable is actively pursuing the dedicated services market. Comcast just announced the formation of a unit that will sell business Internet and phone services to “Fortune 1000 businesses across the country” by employing wholesale purchase agreements with other cable companies to provide service even outside of its footprint. With this venture, it hopes to “steal away more customers from telecom providers like AT&T Inc. and Verizon Communications Inc.” This move is not unexpected. Cable has been targeting the enterprise market, particularly for small- and mid-sized businesses, for years – i.e. Comcast, Time Warner Cable (TWC), and Cox.
And, it would be a mistake to assume that cable only offers best-efforts services. Comcast, for example, touts its Dedicated Internet Access service as a “cost effective and flexible” alternative to DS1 circuits. Check out TWC’s DIA as well as Cox’s DIA.
In addition, cable’s DOCSIS 3.0 and 3.1 based offerings directly compete with telco dedicated services. For proof, just look at cable’s ads targeting DS1 customers; Cablevision trunking ad. DOCSIS 3.0 technology, which has been ubiquitously deployed by cable companies, offers speeds of 150/100 Mbps, more than comparable to DS1, or even DS3, speeds. Now, with the launch of DOCSIS 3.1, cable companies will be rolling out gigabyte speeds across the nation.
In addition, this year, major competitors in the dedicated services market have announced substantial investments in their networks to bring fiber closer to their customers. For example, XO has pledged $500 million to deploy fiber to the premises for business customers across the country. In the past year alone, it has completed nearly 550 FTTP construction projects to enterprise customers in 25 major markets. And Windstream has committed $25 million to increase the number of its out-of-network on-net fiber buildings in five markets by the end of 2015.
The facts show that the current regulatory regime is working to drive real competition and real investment – while CLECs have the option to connect to customers by purchasing UNEs or ILEC services, they are incented to deploy their own facilities. Windstream’s decision to increase fiber investment is based on pure business economics – it wants to decrease its annual expenditures for access by deploying its own fiber. Regulations artificially decreasing or capping dedicated access charges will simply make it less economically prudent for competitors to deploy their own facilities, resulting in less competition, not more. And a return to rate regulation will decrease ILEC network investment as well, just as heavy-handed regulation has stymied broadband facility roll-out abroad.
The take-away here? “Competition, competition, competition” is certainly present in the dedicated services market and, more importantly, is working to drive investment and innovation. Cable is offering new enterprise services and faster speeds, and competitors are deploying more fiber. All of this is evidence that the FCC’s light touch regulatory regime has been an incredible success. Reverting to monopoly-era rate regulation now will only serve to stifle real competition by disincentivizing infrastructure investment by all – precisely the kind of regulation for regulation’s sake that Chairman Wheeler has warned against.