The U.S. Federal Communications Commission on Thursday voted 2-1 to significantly ease regulatory requirements in the $45 billion business data services market, a win for companies like AT&T (T), CenturyLink, and Verizon Communications that could lead to price hikes for many small businesses.
The vote is a blow to companies such as Sprint (S) and others that claim prices for business data are too high and backed a 2016 plan under President Barack Obama that would have cut prices but was never approved.
Small businesses, schools, libraries and others rely on business data services, or special-access lines, to transmit large amounts of data quickly, for instance connecting banks to ATM machines or gasoline pump credit card readers. Wireless carriers rely on them to get data from an end user to a node in a major network or the so called backhaul of mobile traffic.
The decision ends most regulatory requirements in nearly all areas, but retains some price caps in areas with little competition. Democratic FCC Commissioner Mignon Clyburn said the ruling “opens the door to immediate price hikes” to small businesses.
FCC Chairman Ajit Pai defended the decision to drop regulatory requirements, saying they were “seductive” given the promise of lower prices, but that in reality they threatened competition and investment.
Pai said the FCC was adopting a “competitive market test,… to determine where there’s competition and where there’s not.”
Clyburn said FCC Republicans have “again chosen to side with the interests of multi-billion dollar providers.” She said it was “abhorrent that the policy goal is deregulation at all costs.”
In recent days, the independent Small Business Administration Office of Advocacy, the European Union, and Democratic members of Congress have raised concerns about the proposal.
Under Obama, then FCC Chairman Tom Wheeler in April 2016 proposed a sweeping reform plan for business data services that aimed to reduce prices paid.
Wheeler had proposed maintaining and lowering lower price caps using legacy data systems with a one-time 11% reduction in prices phased in over three years.
Sprint, which backed Wheeler’s proposal, told the FCC in a March 22 letter that “thousands of large and small businesses across the country were paying far too much for broadband because of inadequate competition.”
Clyburn noted that while cable companies were entering the market there has been “significant consolidation” including Altice NV acquiring Cablevision, Verizon (VZ) acquiring XO Communications and CenturyLink announcing plans to acquire Level 3 Communications Inc.