Telecom regulator FCC wants to reform $25 bn business data market

wireless data user
Federal Communications Commission (FCC) Chairman Tom Wheeler wants to reform the $25 billion business data market, which is dominated by AT&T and Verizon.

FCC Chairman is in fact responding to several complaints from enterprises and telecoms about market forces and their wrong policies.

Tom Wheeler on Friday proposed a new regulatory framework barring some contractual practices by circuit-based systems that make it harder for businesses to switch to other data carriers like Internet-based services.

The FCC will vote on the proposal on April 28 and will take public comments before it aims to finalize the rules later this year.

Tom Wheeler, who is instrumental in reforming the US wireless market, wants to clean up the estimated $25 billion a year market for high-capacity data and voice connections, known as special access lines, to businesses.

Tom Wheeler in a blog post said he wants a new, technology-neutral approach. “If we want to maximize the benefits of business data services for U.S. consumers and businesses, we need a fresh start,” said Tom Wheeler in a blog post on Friday.

“Despite cable companies entering the market, competitive carriers reach less than 45 percent of locations where there is demand,” said Tom Wheeler.

Many businesses rely on the access lines to transmit large amounts of data quickly, for instance connecting banks to ATM machines or gas pump credit card readers.

Offices, retailers, banks, manufacturers, schools, hospitals and universities utilize these lines to move large amounts of data. Mobile networks also rely on the lines for the backhaul of mobile traffic.

Verizon Communications and AT&T are the major players in the data market for enterprises.

Verizon welcomed the FCC move.

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, Reuters reported.

A coalition of groups including Sprint praised Wheeler saying the forward-looking rules will ensure that competition governs the health and sustainability of this critical input, that ensure consumer benefit, technological neutrality, education and health benefits, and a platform for innovation for the future.

The FCC said special access lines are worth about $25 billion of the $40 billion annual market for business data services.

READ Bloomberg report AT&T, Verizon Said to Face Limits on Business-Data Contracts

AT&T and Verizon Communications would need to ease some terms they offer competitors renting lines that carry data for businesses under a proposal unveiled Friday by FCC.

The proposed order from FCC would prohibit some contract terms that have been demanded by the two largest carriers and by Frontier Communications and CenturyLink.

Rivals that rent the lines for their customers’ traffic, such as Sprint and Level 3 Communications, had told the FCC they’re unfairly treated — an assertion rejected by AT&T and Verizon, which said contracts are forged as part of a competitive market.

Sprint in a filing said the market for business data lines is fundamentally broken. Companies renting lines must agree to buy most of their needs from one provider or face high rates, Sprint said. Sprint and other wireless carriers use the lines to connect cell towers to wired networks.