Wheeler addresses BDS, Set-top Boxes, 5G and Net Neutrality
By Bruce Christian
The message Federal Communications Commission Tom Wheeler shared Monday with The INCOMPAS Show attendees reiterated a theme that he stressed when addressing the event more than a year ago: “Competition, Competition, Competition.”
Wheeler opened by congratulating INCOMPAS on its name change, and quipped, “I can neither confirm nor deny that your rebranding is what inspired us to rebrand the non-descriptively termed ‘special access’ as business data services (BDS).”
Throughout his remarks, Wheeler focused on competition for BDS, competition in the video marketplace and competition for new services and innovation that flows from an open Internet.
Starting with BDS, the Chairman said, “Last week, INCOMPAS and Verizon made an important contribution to the public discussion by submitting a joint letter calling upon us to adopt a new approach to special access regulation.”
He said this action demonstrated that the market is changing.
“The principles you and Verizon articulated are very important and will be very helpful to the Commission as it moves forward,” Wheeler said. “Both Chip Pickering and Verizon’s Kathy Grillo deserve a special shout-out. … My own views are in significant accord with your letter.”
Wheeler said finding common ground should start with common sense, and “I believe the principles I am supporting are firmly based in the realities of the marketplace,” adding, “That marketplace is changing – fast.”
He cited how new technologies offer IP-based products alongside traditional legacy circuit-based products and how new entrants are playing a growing role in the BDS market.
“And the importance of business data services to the economy is becoming ever more important,” Wheeler said. “Think about wireless competition today and the coming of 5G wireless networks and the Internet of Things. According to Intel, the number of connected smart devices is going to increase from 15 billion in 2015 to 200 billion in 2020.”
Fifth-generation wireless trials have begun, and the FCC is preparing to designate spectrum for 5G this summer, Wheeler acknowledged, saying that American leadership in this field is a “national priority.”
“Without a healthy BDS market, we put at risk the enormous opportunity for economic growth, job creation and U.S. competitiveness that 5G represents,” he added.
Wheeler said the FCC data as of 2013 show competitive pathways – including cable – reach less than 45 percent of locations where there is demand. And while cable presence grows, some locations are not benefiting from competition.
“For the Commission to be effective, our rules must be based on market realities,” Wheeler stated. “So we need a fresh start.”
That fresh start calls for broad principles to find common ground for the Commission to determine the best ways to act,” Wheeler said, adding he wants the Commission to adopt the proposed BDS framework this month and conclude the proceeding by the end of the year.
“I assure you that I will treat this issue with the urgency it deserves,” Wheeler said. “Where competition exists, there is little for government to do except to maintain the traditional oversight of telecommunications services; but where competition does not exist, government’s role is to ensure that non-competitive market conditions cannot disadvantage business customers and their ability to compete and innovate in downstream markets.”
Wheeler said the regulatory framework must be technology-neutral, and that companies and technologies that deliver the same kind of BDS should be treated the same. This means where “TDM and IP deliver substitutable services, the market must be judged by looking at both,” he explained.
However, he added the FCC still the transition from TDM to IP.
“The supply of circuit-switched BDS is still big business, but the future is in IP-based, packet-switched communications,” Wheeler said.
It is why Wheeler has asked the FCC to vote declare unlawful contract terms used in a series of tariffs that include so-called “all or nothing” contracts that require a customer to make all of its purchases on a single set of terms.
“Unfair contractual terms can both slow the transition by customers away from TDM and to IP and, by limiting the use of IP-based products like Ethernet, actually discourage investment in the construction of new BDS facilities,” he said.
Citing Harold Feld of of Public Knowledge, who likens BDS to crude oil, Wheeler said, “You would never buy a barrel of oil, but the price of crude impacts what you pay for almost all energy services. The same can be said of business data services. Business data services matter because they are at the heart of virtually everything using telecommunications.”
He also addressed set-top boxes as a threat to what should be the golden era of video competition, which is characterized by consumers’ ability to mix and match the packages of programming they want from a single provider or many over dedicated network facilities, using the Internet or both.
“Ninety-nine percent of pay-TV customers lease set-top boxes from their cable, satellite or telco providers,” Wheeler said. “On average, consumers are paying $231 a year to rent those boxes, collectively $20 billion. Yes, despite Congress’s mandate, they have no competitive choice.”
The FCC is out to correct that, Wheeler said. “We believe our proposal clearly protects both copyright and privacy, but if it can be made better, we are open for suggestions. Clearly, it’s in the public interest to introduce competition in the set-top box marketplace. “
Wheeler also called for attendees to support net neutrality.
“Access to the Internet may be the most important commodity that exists today,” he said. “In an economy built around information, broadband is the key to individual and corporate opportunity. Broadband must be fast, fair and open.
“Our approach to Internet openness is simple,” he continued. “We must enforce the bright-line rules for no blocking, no throttling and no paid prioritization. We must ensure transparency. And we must apply the case-by-case standards in order to protect consumers from harm.”
The Chairman said he believes it is ironic that the same organizations that complain the open Internet rules aren’t sufficient also complain about the Commission’s ability to create certainty through “ex-post examination” of the market.
Wheeler emphasized one obvious principle in the debate is one of the consistent underpinnings of FCC precedent for decades: “An incumbent should not be able to use its position as a gatekeeper to unfairly discriminate against unaffiliated content or services that may, today or tomorrow, pose a competitive threat to the incumbent’s own business.”
Wheeler said it is time for a fresh start. So, yes, it is time for a fresh start, but the fresh start would be summed up with three words: Competition, Competition. Competition.