Last week, the Federal Communications Commission announced that it would scrutinize business internet pricing practices, which critics say force out smaller firms and put customers at a technical disadvantage. But a leading telecom group says that the move plays up an outdated dynamic that’s less relevant than ever as cable companies grow increasingly competitive.
The Federal Communications Commission’s latest attempt to rein in questionable business practices by internet providers involves familiar figures—namely, Verizon and AT&T—but a completely different battleground.
The battleground in this case? The world of business internet, a place where the FCC announced Friday that it is investigating whether the two telecom giants, along with CenturyLink and Frontier, are abusing their market dominance to push anticompetitive tariff pricing on businesses that use their services.
The issues at play here are twofold: First, the market prominence of AT&T, Verizon, and other leading providers is making it difficult for smaller competitors to get a foothold in the broadband sector; and second, the pricing structure for business broadband services—with limited options elsewhere—are forcing businesses into unfavorable contracts that make it difficult for those businesses to upgrade to the latest technology. As some of the biggest consumers of business broadband services include wireless providers, complainants such as Sprint suggest the result can have a negative impact on wireless access.
(Other firms that rely on business-style internet access include hospitals, libraries, ATMs, and small businesses.)
The Broadband Coalition, a trade group representing some of the smaller business broadband providers such as Level 3, XO Communications, and Windstream, applauded the FCC’s investigation, arguing that AT&T and Verizon are effectively taking advantage of their ties to the old Bell system and engaging in anticompetitive practices.
“These lock-up contracts have exclusionary volume terms and conditions that force wholesale business customers to use up to 90 percent of their services each month or face steep penalties,” Broadband Coalition spokesman Jeff Sharp said in a statement. “Just imagine the consumer outrage if you were charged more each month for not using all your cell minutes.”
But from the perspective of the legacy providers, represented by USTelecom, the FCC’s move ignores the fact that the cable industry is also making inroads into the business internet space, creating new kinds of competition for providers.
“The future of the business services market is in advanced, IP-based, high-speed networks that are offered today throughout the nation on a competitive basis by cable and others who can provide service under private contracts that are exempt from regulation,” USTelecom President Walter McCormick stated. “Yet, at the very time the commission is expressing concern over the growing dominance of cable in the overall broadband marketplace, and acknowledging that burdensome legacy regulation of telecom companies is misdirecting investment and hindering competition, it launches an old-fashioned ‘tariff’ investigation of the only competitors in the marketplace who are required to operate under last century’s antiquated rules.”