A new report by a former FCC senior economist states that the FCC business data services proposal could cause “significant harm” to future broadband investment, particularly in rural communities, with new price cap regulations.
“Given the huge potential impacts of the proposed price regulation of business data services — billions in lost revenue for providers, curtailed investment by incumbents and competitors, forgone economic benefits for business, workers and rural economies — it is important to craft regulation carefully in a fully informed manner,” James E. Prieger, professor of economics and public policy at Pepperdine University, says.
The report suggests that the FCC has proposed “potentially drastic rate cuts” on incumbent local exchange carriers (ILECs) that provide business broadband services. The FCC says that the price cap regulation would adjust provider rates to account for rural markets that the FCC perceives to be noncompetitive, but the new report suggests that the Commission’s market data doesn’t accurately represent the market as it currently stands. As the FCC moves forward without updated research on the areas deemed noncompetitive, the Commission leaves the impending local and national effects that the regulation would cause unexplored, the research maintains.
Further, the report estimates that the price cap regulation on providers would eliminate an estimated $1.4 billion in revenue from the ILECs that serve rural communities.
Prieger’s report also elaborates on the potential risks of imposing price cap regulations without including recently updated data on competitiveness in the business broadband market.
“The lost opportunities for revenue will lead to less broadband investment for the communities that need it most — slowing deployment and hurting economies that need help competing,” Prieger states. “Regulators must understand that incentives for investment are paramount to the continued health of existing and expanding networks.”
The report was sponsored by the Invest in Broadband for America coalition. The coalition is asking the FCC to account for information provided by four large cable providers that they had undercounted the number of locations that are capable of providing business data services.
“In a rush to regulate, the FCC has missed the negative consequences of this proposal, particularly the potential for widening the digital divide between urban and rural economies,” John Jones, SVP, public policy and government relations for CenturyLink (a member of the coalition), says.
Last week, a group of U.S. senators, led by Jon Tester (D-MT), expressed concern with the FCC proposal, stating that rural communities “depend on robust investments in business data services to connect small business and anchor institutions, support wireless data service and enable economic development.”
Filed Under: Industry regulations