FCC Proposes Major Deregulation of Business Data Services

FCC Proposes Major Deregulation of Business Data Services 

The Federal Communications Commission (FCC or Commission) has launched a comprehensive review of its Business Data Services (BDS) regulations, proposing to eliminate remaining pricing controls and tariffing requirements for most incumbent carriers. BDS (previously known as “special access”) refers to high capacity, dedicated point-to-point connections. This Notice of Proposed Rulemaking (NPRM) if adopted, will fundamentally reshape how carriers’ price and offer these essential services.

Current BDS Regulations

BDS falls under two technology categories: circuit-based which utilizes legacy Time Division Multiplexing (TMD) technologies and packet-based which relies on IP and includes Ethernet services. Currently, rural “rate of return” incumbent carriers offer their BDS services under tariff unless the carrier receives fixed universal service support from the Alaska Plan or one of the versions of A-CAM and the carrier has elected “incentive” BDS regulation. However, all larger “price cap” carriers offer the high-capacity connections under the relaxed BDS regulatory framework.

Under the BDS framework, the rate-of-return “fixed support” carriers that have elected incentive BDS and price cap carriers must “detariff” their packet-based offerings but are required to continue to tariff their legacy TDM-based low-capacity end user channel termination services under “ex ante” pricing regulation unless the market where they offer the services is deemed competitive. If a periodic “competitive market test” deems that a carrier serves a competitive market, then these low-capacity services must also be detariffed.

Once low-capacity end user channel termination services have been detariffed, the incumbent carriers offer the services via contract or a published “service guide” at market-based rates (as determined by the incumbent carrier).

Proposed Rule Changes

In its NPRM, the FCC is questioning whether its competitive market tests accurately measure competition in today’s marketplace. The Commission seeks comment on whether to eliminate these tests entirely or modernize them using Broadband Data Collection (BDC) data that captures more granular location-level information about competitive offerings.

The NPRM also examines whether rate regulation itself may be distorting market incentives and preventing carriers from transitioning customers to more advanced IP-based services. The Commission specifically asks whether regulatory requirements elsewhere mandate or encourage the purchase of legacy TDM-based services, suggesting it may seek to eliminate such requirements to accelerate the IP transition.

For carriers affected by mandatory detariffing, the Commission proposes a 24-month transition with a six-month rate freeze. During this period, carriers could voluntarily detariff services and would no longer be subject to “ex ante” pricing regulation beyond the rate freeze. It also seeks comment on other forms of reform such as optional deregulation and detariffing.

The Commission acknowledges that some carriers have reported significant price increases for DS1 and DS3 TDM-based services in areas deemed competitive, while others argue these increases reflect market-based pricing that better incentivizes network modernization. This tension highlights the importance of provider input on the practical effects of deregulation and how markets have responded to previous reforms.

Next Steps

This NPRM asks fundamental questions about the future of BDS regulation that will affect how carriers price services, invest in network upgrades, and serve business customers for years to come. The Commission is seeking specific data about competition, pricing impacts, and operational costs that only providers can supply. Comments from carriers of all sizes are essential to ensure the FCC understands how deregulation affects different market segments and service areas, and providers haring their experiences with previous deregulation efforts will directly inform the Commission’s final decisions.

JSI strongly encourages clients to participate in this proceeding either individually or through coordinated group comments. Our team can help analyze how the proposed changes would affect your specific operations, develop strategic comments that protect your interests, and ensure your voice is heard on these critical policy questions. For assistance with comment preparation or to discuss the potential impacts on your operations, please contact Brett Hallagan, John Kuykendall, Carey Roesel, or Douglas Meredith.

Comments will be due 30 days after Federal Register publication, which has not yet occurred.