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FCC Votes to Reform U.S. Business Data Market

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Federal Communication Commission Chairman Tom Wheeler waits for a hearing at the FCC December 11, 2014 in Washington, DC. Photograph by Brendan Smialowski—AFP/Getty Images

The U.S. Federal Communications Commission on Thursday voted to advance reforms of the $40 billion market for business data services, known as special access lines, and to bar some contractual practices by providers.

The FCC voted 3-2 to approve an order that will bar some existing contract requirements by special access providers for businesses using high-capacity data and voice connections and to advance a proposed regulation reforming the market that would create a “new technology-neutral framework” that would extend regulations in non-competitive markets.

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

The lines are used by offices, retailers, banks, manufacturers, schools, hospitals and universities to move large amounts of data. Mobile networks also rely on the lines for the backhaul of mobile traffic.

But there is little competition in many markets, said FCC chairman Tom Wheeler. “Where competition does not exist, then government has a job to do—protecting consumers and competition,” he said Thursday.

Wheeler has noted competitive carriers reach “less than 45% of locations where there is demand.”

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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.

Companies must withdraw “unjust and unreasonable” conditions within 60 days of the order being published, the FCC said Thursday. The proposed reforms of the overall market will face public comment before a final vote by the FCC.

Republicans questioned why the FCC should intervene on behalf of sophisticated businesses like banks that signed contracts for data services.

The services are profitable for large carriers, such as Verizon Communications Inc and AT&T Inc. Smaller carriers, such as Sprint Corp, have argued the special-access market is uncompetitive.

Sprint praised the FCC Thursday for taking a “significant step in reforming the long broken market for business data services.”

The FCC said special access lines are worth about $25 billion of the $40 billion annual market for business data services. The proposal also considers whether other types of business data services, like cable or Internet services, could face further regulatory scrutiny in non-competitive markets.

The National Cable and Telecommunications Association criticized the proposal. It said that while cable companies entering the market has resulted in improved services and lower prices for businesses, it was “disappointing” that the FCC was considering “imposing onerous new rate regulation on these competitive services.”