BDS Deregulation Critics Seek Court Stay of FCC Order; Transfer Motion Complicates Case

The BDS order faces "substantial risk of a judicial stay," said Commissioner Mignon Clyburn when her FCC Republican colleagues approved it April 20 (see 1704200020). The order's "fundamental weakness" was a "competitive market test which relies on potential rather than actual competition," emailed CCMI telecom consultant Andrew Regitsky Wednesday. He believes the stay movants "have an excellent chance" if the case is transferred to the D.C. Circuit," but the stay prospects would be "somewhat less likely" if the 8th Circuit keeps the case, as he suggested "may" happen.

"I have the scars to prove that getting a stay is very difficult," emailed Andrew Schwartzman, Georgetown Law Institute for Public Representation senior counselor. "Transfer motions are harder to predict. ... I can still say that there is a pretty strong argument that this relates to already pending matters in DC, so the motion has a reasonable chance of success." AT&T is challenging a 2016 BDS tariff investigation order in the D.C. Circuit that the FCC asked be remanded to the agency. The FCC argued in its opposition to the transfer motion that the 2017 and 2016 orders "are not 'substantially related' but rather different orders, issued in different dockets, adopted at different points in time, with different records, effecting different agency action under different statutory authority." It also said the D.C. Circuit cases are likely to be remanded or dismissed.

The FCC found its BDS framework needed changes to reflect "intense competition," after "12 years of debate, the largest data request in the history of the FCC, and extensive economic analysis," emailed AT&T. "As fiber and Ethernet-based backhaul circuits in support of 5G wireless services continue to roll out, competition for these services will further intensify. So, despite CLEC efforts to extend an already lengthy analysis of this marketplace, the competition genie is out of the bottle and there is no putting it back in." The FCC and other large ILECs didn't comment Wednesday.

The stay movants said the FCC "almost totally deregulated" the BDS rates affecting businesses that need lower-bandwidth service with performance guarantees at many locations. The incumbent telco "is the only provider with a necessary 'channel termination' connection into 86% of buildings with low bandwidth demand, while another 13% are served by a duopoly," they wrote. Economic conditions don't support building new connections to every building, particularly for lower-bandwidth service, "but business customers demand seamless coverage," said their motion. The order allows ILECs to raise prices or deny competitors access to "critical inputs," which also include dedicated transport connecting networks.

Windstream and the others said they're likely to prevail on the merits and the equities favor a stay: The FCC "erred (1) by arbitrarily and capriciously abandoning rate regulation for low-bandwidth BDS in more than 90% of buildings; (2) eliminating rate regulation of transport services everywhere; and (3) failing to provide adequate notice before sharply departing from the approach proposed in the notice of proposed rulemaking. Competitive carriers will suffer massive, imminent, and unrecoverable harm. A stay will benefit business users that would otherwise suffer the absence of competition, especially small businesses and businesses with multiple locations. By contrast, maintaining the status quo will harm no one, including the incumbents that are currently charging regulated rates that guarantee more than a reasonable return."

The stay movants' arguments are clouded by their "heavily redacted" filings, emailed Larry Downes, Georgetown Center for Business and Public Policy project director. He said, "FCC meddling at the whim of a changing cast of special interests skewed incentives, complicated the obvious, and turned straightforward contracts into regulatory gibberish." The FCC nevertheless "dithered" for years and Chairman Ajit Pai "was right to end the madness," he said. "To ask the courts to stay the order because the parties didn’t have sufficient notice is the height of pettifoggery." Downes added, "If you narrow the 'service' of BDS to mean something increasingly unpopular with customers, and then twist the meaning of 'competition' to eliminate better, faster, and often cheaper providers who are only fifty feet or less away, you can torture the data into showing that a monopoly still exists -- that is, if you also redact all the relevant data points from public scrutiny. The FCC considered and rejected that effort."

Telecom attorney Jeffrey Carlisle said BDS and net neutrality raise two of the same questions. "Should common carrier regulation as administered by the FCC have a role in the data networks of today and tomorrow? Second, to what extent are the courts willing to allow the FCC to define itself out of the business of common carrier regulation? A lot of money hinges on how those two questions get answered," he emailed.