The U.S. Federal Communications Commission (FCC) on Thursday voted to improve competition in the $40 billion market for business data services and to bar some contractual practices by telecom providers.
Reuters report that the business data services are profitable for large carriers, such as Verizon Communications and AT&T. Smaller carriers, such as Sprint, have argued the business data service market is not competitive. Usually, their customers are large and small enterprises.
Users include banks and retailers connecting ATM machines and credit card readers, government and corporate users connecting branch offices and data centers, and mobile phone providers offloading calls and data from wireless networks.
The FCC voted 3-2 to approve an order. The FCC order will bar some existing contract requirements by access providers for businesses using high-capacity data and voice connections. The proposed regulation will reform the market by creating a new technology-neutral framework.
“There is little competition in many markets,” said FCC chairman Tom Wheeler. “Where competition does not exist, then government has a job to do – protecting consumers and competition.”
Business Data Services are critical in the daily life of consumers, businesses & industry. #OpenMtgFCC
— Tom Wheeler (@TomWheelerFCC) April 28, 2016
FCC has noted competitive carriers reach less than 45 percent of locations where there is demand. The US telecom regulator admits that FCC’s existing rules have failed to identify markets where competition is lacking.
One issue is many businesses signed long-term contracts that impose high penalties for opting out of using the services, FCC officials said, making it difficult to switch to another service.
FCC said companies must withdraw unjust and unreasonable conditions within 60 days of the order being published. The proposed reforms of the overall market will face public comment before a final vote by the FCC.
— The FCC (@FCC) April 28, 2016
Sprint praised the FCC on Thursday for taking a significant step in reforming the long broken market for business data services.
The FCC said special access lines are worth about $25 billion of the $40 billion annual market for business data services.
The proposal also considers whether other types of business data services, like cable or Internet services, could face further regulatory scrutiny in non-competitive markets.
The National Cable and Telecommunications Association criticizing the proposal said that while cable companies entering the market have resulted in improved services and lower prices for businesses, it was disappointing that the FCC was considering imposing onerous new rate regulation on these competitive services.
BT said FCC took a major step forward in its commitment to bring real reform to the critical market for business data services. For over a decade, American consumers, businesses, and the US economy have paid the price for the enduring lack of competition in this market.
BT said the FCC is now poised to usher in a new competitive and sustainable business data services framework to the benefit of the entire broadband economy. We thank the FCC for its action today and look forward to continuing our work together to ensure that competition governs this critical input to innovation.