BDS Reform: Winners and Losers

Posted by: Joan Marsh on November 11, 2016 at 11:02 am

Yesterday, Chairman Walden cautioned the FCC that instituting new regulations at this time is unnecessary, unwanted and unfair.  Yet next week, the FCC plans to vote on the sweeping nationwide re-regulation of TDM-based transport and access services.  The FCC’s proposal, as outlined in the Business Data Services (BDS) Fact Sheet released some weeks ago, picks regulatory winners and losers without regard to the significant factual and economic evidence presented in the docket.  Here’s our take on where that scoreboard currently stands.

Loser:  The Facts

The facts about the state of competition in the BDS market were invited to the party via the FCC’s data collection, but were then told to go stand in the corner and not talk to anyone.  The fundamental promise of this proceeding was that the FCC would actually measure competition and regulate only where it did not exist.  That promise was badly broken with the proposal to declare all legacy TDM access and transport facilities below 50 Mbps non-competitive.

If the facts were allowed to talk, they would tell you that ninety percent of AT&T’s sub-50 Mbps bandwidth is within a half mile of competitive fiber and fifty-five percent of CenturyLink’s low capacity bandwidth is in buildings that have two or more competitors within 1,000 feet.  In major urban markets, there are often more than a dozen fiber transport providers – in some of them two dozen.  Indeed, that the transport market is in fact robustly competitive was not disputed on this record and yet the FCC proposes to pull transport facilities fully into the new regulatory regime.

In short, the facts demonstrated that CLEC and cable facilities compete against low capacity BDS demand in the majority of markets.  But the facts have been dismissed and none of that was taken into consideration.

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AT&T Statement on FCC’s
Special Access/BDS Proposal

Posted by: AT&T Blog Team on October 7, 2016 at 12:22 pm

The following may be attributed to Bob Quinn, AT&T Senior Executive Vice President of External & Legislative Affairs:

“This proposal is little more than a wealth transfer to companies that have chosen not to invest in last mile fiber infrastructure. It will result in less fiber investment and contribute to mounting job losses at a time when our country needs just the opposite.

“Like its privacy and set-top box counterparts (which may or may not also be voted upon in three weeks), the special access proceeding seems designed to pick winners and losers rather than being an even-handed analysis based on facts and sound economics.

“While the Commission has correctly determined (for the time being) not to re-regulate the Ethernet market, there is no evidence in the record to support the Commission’s proposal to re-regulate all legacy TDM-based service without regard to the number of competitors operating in a markets. To reach such a preposterous conclusion, the Commission had to ignore facts and virtually all of the economic analysis submitted by its own ‘independent’ economist as well as all of the other economists who provided analysis in this proceeding.”

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Lies, Damn Lies, and Statistics

Posted by: AT&T Blog Team on September 12, 2016 at 11:35 am

By Caroline Van Wie, AT&T Assistant Vice President of Federal Regulatory

As former British Prime Minister Benjamin Disraeli famously said, “There are three kinds of lies: lies, damned lies, and statistics.” Statistics are particularly concerning when they’re taken out of context or used to prop up policies which the body of the larger economic analysis would not support. When it comes to the Commission’s analysis of the Business Data Services market, basing policies on a handful of outlier statistical results while ignoring the weight of the evidence and the data’s deep-seated flaws would result in a disastrous outcome for broadband investment.

Over the past several months, the FCC – first through its hired economist, and later through Staff – has released over 100 regressions that purport to analyze the data the Commission has collected about the Business Data Services market. Each time, the FCC announced that the regressions show that ILECs retain market power for legacy DS1 and DS3 services. Each time, economists, including those the FCC asked to conduct peer reviews of the FCC regressions, observed that the regressions suffer from significant flaws that render them unreliable, including the severe correlation/causation problem that economists refer to as “endogeneity,” incomplete and incorrect data on pricing and the number of competitors, mismatches in the pricing and competitor data, and incorrect methods for computing the statistical significance of the results. And each time, we noted that some of the most significant of these flaws are not fixable because of the limitations of the data available to the FCC’s economists.

Undeterred, FCC Staff released yet another set of regressions in late August. These regressions address one of the problems with the earlier regressions – the flawed method for determining statistical significance. As a result of that correction, many of the prior results purportedly demonstrating the presence of market power in legacy DS1s and DS3s fell by the wayside. Those results now show nothing of the sort. But, no less important, as explained in a white paper filed last week by Drs. Israel, Rubinfeld, and Woroch, the revised regressions do not address the core, foundational flaws that continue to plague the entire exercise. Because of these deep-seated flaws, the regressions continue to produce wildly inconsistent and often anomalous results that in many cases conflict with basic economics. These erratic results confirm that the endogeneity and other data-related flaws are dominating the regressions, and thus they cannot be used to support any conclusions about ILEC market power for DS1s and DS3s.    

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The BDS Facts Speak for Themselves

Posted by: AT&T Blog Team on August 9, 2016 at 2:53 pm

By Caroline Van Wie, AT&T Assistant Vice President of Federal Regulatory:

As Senator Daniel Patrick Moynihan famously said, “Everyone is entitled to his own opinion, but not his own facts.”  The FCC has spent the last year analyzing the data submitted in the Business Data Services proceeding to understand what is driving the BDS marketplace.  It has committed to a “data-driven” rulemaking process in its analysis of whether additional BDS regulation is needed.  The jury is still out as to whether that will take place.

As we explain in today’s reply comments, the facts show that competition in the BDS market is thriving. Even as of 2013, competitors had deployed competing facilities in more than 95% of MSA census blocks with BDS demand, and those blocks contain 97% of all BDS connections and 99% of business establishments.  And, according to the NPRM, ILECs’ in-region market share was already under 50%.  Undoubtedly, competition is now even more pervasive, particularly given that cable companies are now prioritizing the BDS marketplace to grow their revenues in the face of more intense competition for their core video offerings.

CLECs predictably attempt to downplay this competition, mostly by twisting the data to focus on areas where there is no BDS demand and by dismissing years of Commission and Department of Justice precedent under which it was recognized that the presence of sunk facilities constrain BDS prices. But the economist retained by the Commission found, based on his analysis of the facts, that “fiber-based competitive supply within at least half a mile generally has a material effect on prices of BDS.”  And the data show that nearly all buildings with ILEC BDS connections are well within a half mile of competitive fiber.  In fact, three quarters of them are within just 456 feet of competitive fiber and about half of all ILEC BDS buildings are merely 88 feet from competitive fiber.

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Verizon Yesterday versus Today:
New Wires, Old Rules?

Posted by: AT&T Blog Team on June 30, 2016 at 11:55 am

By Caroline Van Wie, AT&T Assistant Vice President of Federal Regulatory

As comments in the special access proceeding (oops, I mean Business Data Services proceeding) roll in, I thought I would put together a few sentences which accurately capture AT&T’s views on this proceeding:

“[T]here is no basis on which to increase regulation of ILEC business broadband services, including legacy special access and Ethernet.  [T]here is no evidence supporting a finding that ILEC rates for traditional TDM-based special access services (e.g., DS1 and DS3) are unjust and unreasonable.  There is no factual basis to support a finding of market power or market failure in the business broadband marketplace.  According to the Commission’s data, competitors have deployed networks capable of providing high-capacity services in all metropolitan areas throughout the country that contain concentrated demand for these services. Although the Commission’s data understate the extent of actual and potential competition, even with these shortcomings these data show competitors have deployed networks capable of providing high-capacity services in all metropolitan areas throughout the country that contain concentrated demand for these services. Despite these problems [with the 2013 data], the record confirms competitors have deployed facilities in large and small areas throughout the country — not only in downtown areas, but in all types of locations where there is concentrated demand for high-capacity services. The record also shows a wide range of providers and significant new entry, including from cable operators, and that different types of competitors are succeeding in this marketplace, using a wide array of high capacity services. Even  based on the outdated and incomplete record here, the evidence of competition where there is concentrated demand includes steadily declining retail prices; mass migration from legacy technologies (TDM) to new ones (Ethernet and broadband IP) that offer greater quality and value; disruptive facilities-based entry by cable companies; growing use of alternative technologies such as best-efforts broadband and fixed wireless; the continued growth of traditional CLECs; and the indisputable competitiveness of downstream markets, such as wireless, in which providers use business broadband services as an input.”

“[T]he record demonstrates the Commission’s analysis should include all forms of high-capacity services that customers are using to meet their needs, which includes not just legacy TDM-based special access services but also Ethernet services and best-efforts broadband services offered by cable.  For many customers, best-efforts broadband service provides a greater value proposition than dedicated services of comparable bandwidth, and the need for features such as ‘99.99 percent uptime,’ ‘the ability to prioritize traffic among different Quality of Service (‘QoS’) levels for different applications,’ and low jitter and latency is not worth the premium. Cable companies routinely market their best-efforts broadband services as an alternative to dedicated services such as DS1, and many business customers view them as competitive alternatives to legacy TDM-based dedicated services. . . .  The Commission cannot simply exclude best-efforts broadband services because they are not functionally identical to dedicated services.”

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