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Business data services (BDS), also known as special access, are high capacity access services provided over dedicated facilities for business, educational, healthcare and other institutions. Interstate special access rates for price cap carriers (e.g., Bell Operating Companies) have been governed by the Commission’s price cap rules since 1990. Price cap regulation, however, has become less predominant as the Commission granted pricing flexibility or forbearance from dominant carrier treatment for non-Time Division Multiplexing (non-TDM) special access services.

In 2005, the Commission released the Special Access Order and NPRM to initiate an inquiry into what price cap rules should apply to special access services after 2005, whether the pricing flexibility rules have worked as intended and, if not, whether they should be modified or repealed. In 2012, the Commission adopted the Special Access Pricing Flexibility Suspension Order, in which it concluded that the pricing flexibility rules were not working as intended and consequently suspended further grants of pricing flexibility pending further analysis of the special access market. Later in 2012, the Commission released a Special Access Data Collection Order calling for the mandatory collection of data from providers and purchasers of special access services for a market analysis. In the accompanying FNPRM, the Commission sought comment on: (1) a proposed market analysis for evaluating the collected data; (2) possible changes to the pricing flexibility rules for the special access services provided by ILECs in price cap areas; and (3) the terms and conditions offered by ILECs for the sale of special access services.

In May 2016, the Commission released a Tariff Investigation Order and Further Notice in the BDS/Special Access proceeding. In the Further Notice, the Commission proposed to replace the existing, fragmented regulatory BDS structure with a new regulatory framework that classifies markets as either competitive, in which providers are subject to minimal oversight, or as non-competitive, in which providers are subject to continued pricing and tariff. The Further Notice surveyed current marketplace conditions and proposed to identify competitive markets as those in which material competitive effects are present. It proposed to minimize regulation of competitive markets to ensure that the provision of telecommunications services remains just and reasonable and not unreasonably discriminatory, and proposed and sought comment on a tailored set of rules, including pricing rules, to safeguard customers in non-competitive markets.

The May 2016 Tariff Investigation Order resolved many of the issues raised in a 2015 Designation Order that had initiated a section 205 investigation into certain BDS tariff pricing plan terms and conditions for the provision of DS1,DS3, and other circuit-switched services offered by AT&T, CenturyLink, Frontier, and Verizon. In the Tariff Investigation Order, the Commission addressed three types of provisions it found to be unreasonable, including so-called all-or-nothing provisions that require buyers to make all their purchases under a single pricing plan, and shortfall and early termination penalties that exceeded the revenues ILECs anticipated under the pricing plans in question. The four aforementioned price cap LECs were directed to amend their relevant tariffs consistent with the Order. The Commission closed the investigation with the exception of the question of any further action necessary to implement the finding that all-or-nothing provisions were unlawful on existing sales agreements, on which it sought additional comment in the Further Notice. AT&T filed an appeal of the Order, which the United States Court of Appeals for the D.C. Circuit remanded to the Commission on August 29, 2017.  The Commission invited comment on that Remand on December 19, 2017.

On April 28, 2017, the Commission released a Report and Order (BDS Order) that eliminated pricing regulation and tariff requirements for most types of BDS. In the BDS Order, the Commission made findings as to the relevant market for analysis, trends in competition, and the presence of market power. The Commission found competition sufficiently widespread that pricing regulation would be counterproductive for all packet-based business data services, TDM-based services with bandwidths in excess of a DS3, and TDM transport services. The Commission declined to adopt ex ante pricing regulation for these services.

In the BDS Order, the Commission adopted the following competitive market test to distinguish among counties in which price cap LECs provide TDM DS1 and DS3 end user channel terminations, For a particular county if: 50 percent of the buildings in that county are within a half mile of a location served by a competitive provider based on the 2015 Collection or 75 percent of the census blocks in a county have a cable provider present based on Form 477 data, the Commission found that ex ante pricing regulation of the price cap LEC’s DS1 and DS3 services in that county would be counterproductive. For price cap LECs, all packet-based BDS, all transport services and DS1 and DS3 services in counties that meet the competitive market test were relieved of ex ante pricing regulation and are subject to permissive detariffing for a period of 36 months at which time they will be subject to mandatory detariffing. The Commission imposed a six-month price freeze for price cap LECs’ tariffed DS1 and DS3 services in counties that are deemed competitive. It also grandfathered existing BDS contract tariffs. For counties that do not meet the competitive market test, the Commission retained price cap regulation for DS1 and DS3 end user channel terminations, but permitted the price cap carriers serving in those counties to offer volume and term discounts, as well as contract tariffs. It also grandfathered the Phase II pricing flexibility obtained by price cap carriers in counties deemed non-competitive by the competitive market test based on the administrative burden of converting these carriers in these counties back to price cap regulation. The Commission incorporated a productivity-based X-factor of 2.0 percent for DS1 and DS3 end user channel terminations in non-competitive, non-grandfathered counties on a going-forward basis and concluded that no catch-up adjustment is warranted. The Commission confirmed that packet based and TDM services that are relieved from ex ante pricing regulation continue to be subject to its regulatory authority pursuant to sections 201, 202, and 208 of the Act.

In the BDS Order, the Commission adjusted forbearance to be consistent with its revised regulatory framework for business data services, leveling the regulatory playing field for all price cap providers. The Commission extended forbearance from section 203 of the Act to all price cap incumbent LECs for all packet-based business data services, for TDM services that exceed DS3 speeds, for all TDM transport services and other TDM services that are not end user channel terminations, and for all TDM end user channel terminations in counties that meet the competitive market test criteria. The Commission also conformed forbearance that had been deemed granted to Verizon and its successors in interest to the forbearance provided other carriers.

For DS1 and DS3 end user channel terminations in counties that do not meet the competitive market test criteria, the Commission prohibited the use of non-disclosure agreements (NDAs) in business data service tariffs, contract tariffs, and commercial agreements that restrict or forbid disclosure of information to the Commission, or require a prior request or legal compulsion by the Commission to effect such disclosure, provided that any confidential information is submitted subject to a Commission protective order. The Commission concluded that certain business data services, such as certain services Comcast and Charter describe in the record, constitute private carriage rather than common carrier services and are therefore not subject to title II regulation. The Commission confirmed that the interim rules established in the Emerging Wireline Order, which require incumbent LECs to offer reasonably comparably priced packet-based services as a condition of approval of a section 214 discontinuance of TDM business data services in a wire center, will discontinue upon the effective date of the rules in the Order.