Just weeks after the FCC adopted rules that relax or lift regulatory requirements for many providers of special access, or business data services (BDS), Sprint and Windstream have asked the D.C. Circuit Court of Appeals to “reverse and hold unlawful” the BDS order on grounds that the FCC’s April 20 decision “is arbitrary, capricious, and an abuse of discretion.” Valued last year at $45 billion, the U.S. BDS market sources the high-capacity broadband connections used by thousands of businesses to facilitate ATM and credit card transactions and a host of other essential services. Sprint leases BDS capacity from carriers such as AT&T, Verizon and CenturyLink as a mechanism for providing wireless backhaul services and delivering services to business customers. Windstream, a regional incumbent local exchange carrier, uses BDS capacity to extend its ability to provide business services in areas where the company lacks fiber network facilities.
Departing from the regulatory approach and tentative conclusions proposed in an April rulemaking notice adopted by an FCC, which was led at the time by former Chairman Tom Wheeler, the April 20 order concludes that the U.S. market for BDS services is largely competitive. As such, the FCC decided to lift price regulations for packet-based BDS services that operate at speeds in excess of 45 Mbps. The order also eliminated price regulation of TDM BDS in counties where (1) at least half of the buildings are located within a half mile of a location served by a competitive BDS provider, or (2) 75% of the census blocks have at least one cable network provider.
In their petition for review, which also charges the FCC with violating the notice and comment procedures of the Administrative Procedures Act, Sprint and Windstream highlighted the FCC’s claim in April 2016 that “competition remains stubbornly absent in many parts of the [BDS] marketplace.” Sprint has described the price it pays for BDS capacity as “a significant cost for our wireless and wireline segments.” In addition, Windstream CEO Tony Thomas recently told investors that “small and medium size businesses will be unduly harmed by an unregulated [BDS] marketplace in which very little or no competition exists in more than 90% of business locations across the country.” Sprint and Windstream also warned the FCC in an April 14 letter that the BDS order could “transfer an enormous amount of wealth from the thousands of American businesses that buy dedicated broadband to a small group of large telecommunications companies,” pointing out that, on the day after the FCC circulated its draft BDS order, AT&T announced a 15% price hike for intrastate private line DS3 services that would take effect “on or after” the BDS vote on April 20. Although AT&T executives declined comment on the appeals court filing, AT&T assistant vice president Carolyn Van Wie defended the “light touch regulatory regime” that the FCC prescribed for BDS services, declaring in a recent blog post that “these commonsense reforms are grounded in the FCC’s massive data collection and voluminous record.”