FCC Ponders Price Regulation of Obsolete Data Services

A few months ago, the FCC voted to initiate a new proceeding that could lead to a re-regulation of prices for special access service, with them setting prices for how much telecom firms are allowed to charge some businesses for the service.  According to the FCC, there was enough evidence to show that the current system for pricing for special access service wasn’t working, and that the system is failing to accurately peg exactly what the market demands.  This is an especially interesting claim, as the FCC asked for no data from the owners of the lines, and it appears the decision to start the proceedings were made in haste.

As background to this issue, perhaps we should start at the beginning.  Special access service is a near-outdated technology.  It was the original high-speed Internet, popularized in the 1980’s.  It’s a copper-based communication technology, something that’s become outdated our new broadband world.  For example, special access service could provide speeds as low 64 kilobits per second (roughly wireless voice speed) and often 1.544 megabits per second (called T1 speed) – speeds which well below what even my iPhone provides.  But this service is still used for private business and internal communications.   Often provided by wireline telecommunications carriers, wireless companies like Sprint and T-Mobile are among those paying for special access services to supplement carriage between portions of wireless networks. 

In the 1990’s, special access service was deregulated by the Clinton Administration FCC in order to let the market set the rates.  The FCC then knew that in order to encourage investment and innovation in new networks and broadband, it had to allow the market to run its course and allow the telecom companies to set their own rates in those markets deemed to be competitive.

Now, the smaller carriers are attempting to get the FCC to force the larger carriers to lower their prices for special access service.  As ACI’s president Steve Pociask explains, it’s basically one group attempting to get another group to subsidize them. In essence, the FCC would be forcing wireline facility-based carriers to subsidize wireless carriers by imposing artificially low prices.  What would be the benefit to anyone, other than those being subsidized? 

There wouldn’t be any.  Consumers don’t benefit from this scenario—it’s one company subsidizing another.  So one way or another, the consumers of wireline investments are going to be hurt.  And why do the customers of wireless carriers need subsidizing anyway?  As Steve points out, the new wireless services are faster and cheaper than these old technologies.  So claiming that government fixed prices will help consumers simply is not true—it’s merely a handout to help the bottom line of wireless carriers.  

By forcing wireline telephone companies to lower their prices, the FCC is putting something far more important than the profits of wireless services at risk.  It’s putting investment in faster wireline broadband services and better wireline infrastructure at risk, as Anna-Maria Kovacs explains in a recently published paper.  Maintaining these aging special lines is expensive, and asking the telecom companies to continue to operate them and subsidize others users only draws resources away from what we should be focused on – namely, providing better and faster broadband services to consumers, especially as we enter a new era of commerce and connectivity on the web.  

The FCC needs to be technology neutral.  The FCC shouldn’t put broadband investment at risk.  Reinstating monopoly-era price controls only hurts consumers through hidden costs and less investment in 21st century technologies.

Zack Christenson writes on digital tech issues for the American Consumer Institute

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