BDS Reform: A No-Brainer for Both Businesses and Consumers

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Yesterday, Public Knowledge joined 11 other public interest groups in a letter to the Federal Communications Commission on the Business Data Services proceeding. You can view and download the letter here.

After a proceeding that has stretched on for more than a decade, the Federal Communications Commission’s largest ever data collection, and numerous delays, the fight over business data services (BDS) reform (previously referred to as “special access” reform) could be nearing its end. FCC Chairman Tom Wheeler has repeatedly promised the FCC is finally set to reform the BDS market this year by lowering the rates that monopoly phone companies can charge to businesses, institutions, and wireless carriers, and promoting new competition and market entry.

BDS lines are dedicated high-capacity broadband connections that businesses and institutions use to transmit their voice and data traffic. Organizations that rely on BDS are as varied as private businesses of all sizes, such as retailers, grocery stores, small businesses and startups, financial institutions, as well as large institutions and government entities like universities, hospitals, schools, libraries, and state and local government offices.

Wireless carriers also rely on BDS for backhaul support to connect their cell towers to the fiber network, which transports and terminates user calls and data transmissions. With 5G networks on the horizon, wireless carriers will need even more backhaul to connect micro cells on every street corner. As a result, consumers are impacted by BDS in numerous ways. Whenever a consumer uses a smartphone to make a call or browse the web, makes a transaction at an ATM, or even swipes a credit card at a local grocery store, a BDS connection is required to complete the voice or data transmission. In short, BDS affects the entire ecosystem of broadband connectivity and is critical to both businesses and consumers.

Unfortunately, there is not effective competition in the BDS market – in the vast majority of instances, the incumbent carrier is the only service provider. The lack of competition allows BDS providers to charge exorbitant rates to their customers. It’s no surprise that BDS providers have profited from the ability to charge monopoly rents – to the tune of $45 billion per year – with half of those charges stemming directly from the lack of BDS competition or effective regulation. This is incredibly bad for businesses, consumers, and the overall economy. Businesses are forced to overpay for BDS, and these costs are ultimately passed down to consumers in the form of higher cell phone bills and increased prices for goods and services. The Consumer Federation of American found that BDS overcharges and abusive pricing has sapped the U.S. economy and consumers of $150 billion over the past five years alone. BDS reform is ultimately a pocketbook issue for consumers and small businesses, and the evidence clearly show the market is broken.

Last month, Public Knowledge, along with other public interest and consumer advocates sent a letter to Congress urging Members to support the FCC’s effort in making the BDS market more competitive. Yesterday, we joined 11 other public interest and consumer advocates in a letter to the FCC. Crucially, BDS reform must address excessive pricing for both legacy TDM services and high-capacity Ethernet services. Failure to address monopoly Ethernet pricing only preserves incumbent carrier monopoly pricing and green lights anti-competitive behavior in the future. 

Even with a wealth of information indicating that the BDS market is broken and controlled by monopoly telecom providers, opponents are still fighting to delay or kill the common sense reforms that business customers, consumers, wireless carriers, and the vast majority of the telecom industry have coalesced around. Opponents of BDS reform are using the only tool in their arsenal – calling for more delay and questioning the FCC’s process. These are losing arguments, and tired tactics. The evidence overwhelmingly shows there are only one or two BDS providers in a majority of customer locations. The FCC must act now to create much needed incentives for competition in the BDS market while protecting consumers and promoting economic growth.

For too long, businesses and consumers have been hurt by exorbitant rates while BDS providers have seen windfall profits. It’s not often that both businesses and consumers benefit from new regulations, but in this case, BDS reform is a no-brainer for both sides.

Check out our interactive timeline of the Business Data Services proceeding:

 
 

Image credit: Flickr user Incase.

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