Friday, October 6, 2017

FCC Accused of Distorting Data to Minimize Competition Woes -

While most realize the residential broadband market isn't all that competitive, lesser talked about is the lack of competition in the special access and Business Data Services (BDS) market. This market connects everything from banks, ATMs and cell towers to the internet, but has long faced monopoly control by only a handful of large telcos (usually AT&T, Verizon or CenturyLink). In fact, FCC data states that 73% of BDS markets are dominated by just one provider, 24% are served by a duopoly, and only a tiny fraction have more than two choices of BDS providers.

Needless to say, companies like AT&T and Verizon have worked pretty tirelessly at keeping it this way, despite a decade of efforts by consumer advocates and smaller companies (like Sprint & T-Mobile).

And while the sector has seen some modest additional competition from cable providers in recent years, the lack of BDS competition is still a major problem. Last year, after a decade of debate, former FCC boss Tom Wheeler began taking the ultimate step toward some reforms of this market, including something the agency rarely does for broadband: applying price caps that limit how much these mono/duopolies can over charge.

But that unfinished effort was killed by new FCC boss Ajit Pai soon after he became FCC head. Pai ignored AT&T and Verizon's total domination of this market, declared the sector fully competitive, and pushed a partisan agency vote to roll back regulations governing the BDS sector. Pai's plan declared an entire county as competitive "if 50 percent of the locations with BDS demand in that county are within a half mile of a location served by a competitive provider." A county would also be considered competitive if 75 percent of Census blocks in the county have a cable provider.

However, Public Knowledge, Consumer Federation of America, and New Networks Institute this week filed an Amicus Brief in the US Court of Appeals for the 8th Circuit, requesting the Court overturn and remand the FCC's plan, arguing that it relies on manipulated math and half truths to obfuscate industry problems.

"Public Knowledge's brief explains that the Commission's finding that duopoly competition -- or even 'potential duopoly' competition -- is sufficient to discipline market power in the BDS market is absurd," said the group in a statement. "The Commission's analysis and the Order are contrary to the Commission's prior precedents, the Department of Justice/Federal Trade Commission standard for evaluating market concentration, the record in the proceeding itself, and leading scholarship on market structure and market power."

"Three decades of intensive study of potential competition and duopolies shows that they do not create sufficient competitive pressures to discipline the abuse of market power," argues Mark Cooper, Senior Fellow at Consumer Federation of America. "Under the FCC's theory, the tens of billions of dollars of excess profits collected from consumers will go on unabated, and the door would be thrown open for a massive and unprecedented merger wave."

In other words, the groups believe Pai and friends are manipulating data to try and minimize the competitive problems in the business broadband sector, the same MO being applied to both the fixed and wireless residential broadband sectors.

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