Data Price Hikes Expected In The Face Of A Deregulation By Republican-Controlled FCC

A Thursday vote by the Federal Communications Commission will now see the Business Data Services segment that is worth approximately $45 billion deregulated. Small businesses are likely to be affected by price hikes in the deregulation move that will translate to a win for firms such as Verizon Communications and AT&T. The move will be a blow to Sprint Corp and other organizations which already claim that the cost of business data is too high.

Immediately after the vote, Mignon Clyburn, the Democrat-leaning FCC Commissioner who voted against the deregulation move, voiced her reasons for her dissent.

“What this order does is open the door to immediate price hikes for small business broadband service in rural areas and hundreds of communities across the country,” said Clyburn in a detailed statement.

Expensive essential connectivity

Also sharing in the concerns of Clyburn was the advocacy office of the U.S. Small Business Administration which was worried that schools, hospitals, businesses and other consumers would be forced to pay extra for essential connectivity. A week ago the advocacy office had asked that the vote be delayed.

Though the prices of household internet services are not capped, the U.S. Federal Communications Commission controls prices of Business Data Services that are offered by service providers such as CenturyLink, Verizon Communications and AT&T. The delivery of these Business Data Services is normally through TDM networks that are copper-based. These services have dedicated links where speeds reach close to 45Mbps downstream and upstream. Some of the common uses of these services include connecting banks to credit card readers or automated teller machines.

Threat to investment

Following the vote, price caps will cease to exist in those counties where half of the potential clients are located in a distance of half a mile from a place where a competitive provider is present. Where three quarters of census blocks are served by a cable provider, such a county will be considered competitive. According to the Federal Communications Commission internet service providers located nearby would be willing to offer their services to a wider area if the price caps were eliminated.

In defending the decision, Ajit Pai, the chairman of the Federal Communications said that while price regulation is seductive it is a threat to investment and competition. According to Pai, when prices are capped at too low a level, owners of networks will lack an incentive for upgrading their facilities. Other providers won’t also have the motivation to develop their own facilities.