Federal Communications Commission FCC 16-54 Before the Federal
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Federal Communications Commission FCC 16-54 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Business Data Services in an Internet Protocol ) WC Docket No. 16-143 Environment ) ) Investigation of Certain Price Cap Local Exchange ) WC Docket No. 15-247 Carrier Business Data Services Tariff Pricing Plans ) ) Special Access for Price Cap Local Exchange ) WC Docket No. 05-25 Carriers ) ) AT&T Corporation Petition for Rulemaking to ) RM-10593 Reform Regulation of Incumbent Local Exchange ) Carrier Rates for Interstate Special Access Services ) TARIFF INVESTIGATION ORDER AND FURTHER NOTICE OF PROPOSED RULEMAKING Comment Date: June 28, 2016 Reply Comment Date: July 26, 2016 Adopted: April 28, 2016 Released: May 2, 2016 By the Commission: Chairman Wheeler and Commissioners Clyburn and Rosenworcel issuing separate statements; Commissioner Pai and O’Rielly dissenting and issuing separate statements. TABLE OF CONTENTS Para. I. INTRODUCTION .................................................................................................................................. 1 A. Executive Summary ....................................................................................................................... 11 II. BACKGROUND .................................................................................................................................. 12 A. Business Data Service Connects Business ..................................................................................... 12 B. The Business Data Services Rulemaking Proceeding .................................................................... 16 1. Price Cap Regulation of Business Data Services .................................................................... 16 2. CALLS Plan ............................................................................................................................ 19 3. AT&T Petition for Rulemaking and the 2005 NPRM ............................................................. 20 4. The GAO Report ..................................................................................................................... 22 5. Forbearance Actions Starting in 2006 ..................................................................................... 24 6. Bureau Actions in 2009 to 2011 .............................................................................................. 26 7. The Commission Suspends the Pricing Flexibility Rules ....................................................... 28 8. The Bureau Implements the Data Collection .......................................................................... 29 9. Technology Transitions Rulemaking ...................................................................................... 38 C. 2015 Collection Overview ............................................................................................................. 39 III. BUSINESS DATA SERVICES INDUSTRY OVERVIEW ................................................................ 44 A. Business Data Services Technology .............................................................................................. 45 Federal Communications Commission FCC 16-54 B. Facilities-Based Suppliers of Business Data Services ................................................................... 51 C. Other Providers .............................................................................................................................. 67 D. Business Data Services Purchasers ................................................................................................ 70 E. Increasing Data Demands .............................................................................................................. 77 F. Increasing Demand for Ethernet Services ...................................................................................... 80 IV. TARIFF INVESTIGATION ORDER .................................................................................................. 86 A. Additional Background .................................................................................................................. 89 B. All-or-Nothing Requirements ........................................................................................................ 95 C. Shortfall Penalties ........................................................................................................................ 115 D. Early Termination Penalties ......................................................................................................... 141 V. FURTHER NOTICE OF PROPOSED RULEMAKING ................................................................... 159 A. Competition Analysis................................................................................................................... 160 1. Overview ............................................................................................................................... 160 2. Analysis as Proposed ............................................................................................................. 166 3. Economic Analysis Submitted by Parties .............................................................................. 170 4. Our Approach ........................................................................................................................ 186 5. Product Markets .................................................................................................................... 189 6. Customer Markets ................................................................................................................. 199 7. Geographic Markets .............................................................................................................. 204 8. Concentration by Any Measure Appears High in This Industry ........................................... 216 9. Entry and Entry Barriers ........................................................................................................ 224 10. Evidence of Market Power in the Delivery of DS1 and DS3 Services and Lack Thereof for Higher Bandwidth Services................................................................................ 237 B. New Technology Neutral Regulatory Framework for Business Data Services ........................... 256 C. Statutory Authority for New Regulatory Framework .................................................................. 261 D. Competitive Market Test ............................................................................................................. 270 1. Business Data Service Definition .......................................................................................... 279 2. Multi-Factor Competitive Market Test – Relevant Market(s) and Test Criteria ................... 280 3. Competitive Market Test in Application ............................................................................... 296 4. Post-Determination Process .................................................................................................. 300 5. Regulation for Provider(s) in Areas Determined Non-Competitive ...................................... 308 E. Rules Applying to All Markets .................................................................................................... 312 1. Non-Disclosure Agreements ................................................................................................. 313 2. Scope of Application of Terms and Conditions Requirements Adopted in the Tariff Investigation Order ................................................................................................................ 321 F. Rules Applying to Non-Competitive Markets ............................................................................. 344 1. Price Cap Regulation ............................................................................................................. 345 2. Anchor or Benchmarking Pricing .......................................................................................... 420 3. Wholesale Pricing.................................................................................................................. 441 4. Terms and Conditions ........................................................................................................... 447 G. Alternative Approaches to Reforming BDS That Fulfill Core Goals .......................................... 492 H. Deregulation of the Pricing Process ............................................................................................. 497 1. Replacement of Pricing Flexibility Rules.............................................................................. 499 2. Additional Regulatory Incentives for Price Cap Carriers ...................................................... 503 I. Forbearance Grants and Deemed Grants ..................................................................................... 513 1. Verizon Deemed Grant .......................................................................................................... 515 2. Other Forbearance Actions .................................................................................................... 518 3. Legal Standard and Procedure ............................................................................................... 520 J. Monitoring the Marketplace Going Forward ............................................................................... 522 1. Mandatory Periodic