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Self-Serving BDS Discounts Pitched to FCC

11.04.2016

USTelecom urges the Federal Communications Commission to reject demands to force a mandatory “wholesale” discount structure on the business data services (BDS) marketplace, a discount that only competing carriers and Commercial Mobile Radio Services (CMRS) providers would enjoy, according to a recent filing. Mandating a special discount for a favored class of resellers will only result in more resale and less investment in broadband networks.  

A wholesale discount is completely foreign to the commission’s special access regime that has been in place for more than 30 years.  Under FCC supervision, the industry has developed an approach to BDS discounts predicated on volume and term commitments.  The commission repeatedly has endorsed the use of volume and term discounts because they encourage the efficiencies gained with increased traffic and the certainty associated with long-term business relationships.

Proponents of a wholesale BDS discount don’t clearly explain that changes in the marketplace require a completely different regulatory approach. They claim they “pay twice” for retail costs to serve customers - once in connection with their own retail operations and also to the company selling the service.

This theory ignores that, according to the commission’s data, the vast majority – about 90 percent - of BDS sales are to other telecom providers. There is no reason to believe that current BDS rates reflect significant costs associated with the sale, marketing, and support of retail business data services that are somehow magically avoided when that capacity is sold at wholesale.

The “pay-twice” theory ignores the significant costs that an incumbent carrier incurs in selling and provisioning services to a competing carrier for resale. Under current FCC rules, regardless of the identity of the buyer, regulated incumbent providers must provide a circuit to a particular location. They must log, track, maintain, repair and bill for the circuits. Resellers do not maintain or repair the circuits they order. 

Grafting a new wholesale discount on to the current structure does not reflect how BDS is sold and would be counter to the commission’s longstanding goals of facilities-based competition.  As FCC Chairman Tom Wheeler recently noted, “if you're going to get competition, competition is a facilities-based issue, it is not an ersatz unbundling issue.”

Furthermore, a wholesale discount that would only be available to some customers (certain carriers) but not others (enterprise customers) would constitute a restriction the FCC has long found to be “anticompetitive and anti-consumer” and therefore unlawful.

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