In May, 2016, the FCC moved forward with its decade-overdue reform of the $45 Billion per year dedicated business data services (“BDS”) market. BDS providers, including major incumbent telecommunications companies and now even cable television companies offering dedicated BDS services on the one hand, and major BDS customers, including wireless carriers, competitive wireline carriers, and enterprise business customers on the other, will all be substantially impacted by the FCC’s Tariff Investigation Order (“Order”) and Further Notice of Proposed Rulemaking (“NPRM”).

The Commission found unjust and unreasonable 18 existing BDS tariff plans offered by AT&T, Verizon, CenturyLink and Frontier, including “all or nothing” provisions, and certain shortfall and early termination charge provisions of volume/term BDS pricing plans that lock up customers and prevent them from transitioning services from traditional incumbent LEC TDM services to more scalable and cost-effective Ethernet and other packet-based BDS Services which represent the technological future of BDS services.

In its rulemaking, the Commission recognizes that its prior regulation of BDS or special access markets were based on an imprecise competitive trigger, which it now seeks to correct. The client alert summarizes the key takeaways of the Order and NPRM, such as the FCC’s proposed new requirements for the provision of BDS in competitive and non-competitive markets, and preserving of price cap regulation for non-competitive markets. The Commission seeks comment on a Competitive Market Test that applies new criteria of (a) business density and (b) number of facilities-based competitors in a given area to determine whether a relevant, geographic market is competitive. It also requests comment on other reforms and approaches to make BDS markets competitive and to promote the ability of customers to transition from traditional copper-based TDM special access services to IP-based, packet-switched BDS services such as Ethernet. Comments in this significant rulemaking are due June 28, 2016.