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FCC proposes reforming business data services market

Federal Communications Commission (FCC) Chairman Tom Wheeler arrives to testify before a Senate Appropriations Subcommittee hearing on FCC's proposed budget for 2016, in Washington, May 12, 2015. REUTERS/Carlos Barria

By David Shepardson

WASHINGTON (Reuters) - The chairman of the U.S. Federal Communications Commission on Friday proposed reforming the estimated $25 billion a year market for high-capacity data and voice connections, known as special access lines, to businesses.

FCC chairman Tom Wheeler said he was recommending a new "regulatory framework" barring some contractual practices by circuit-based systems that make it harder for businesses to switch to other data carriers, adding he wants "a new, technology-neutral" approach.

"If we want to maximize the benefits of business data services for U.S. consumers and businesses, we need a fresh start," Wheeler said in a blog post on Friday, noting that despite cable companies entering the market, competitive carriers reach "less than 45 percent of locations where there is demand."

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

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.

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.

Verizon said in a statement it is "encouraged that (Wheeler) has proposed a path toward a balanced framework that would put all providers on equal footing under the same set of rules. It would also rely on competition, rather than regulation, whenever possible."

A coalition of groups, including Sprint, praised Wheeler saying the "forward-looking rules will ensure that competition governs the health and sustainability of this critical input."

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

The FCC will vote on the proposal on April 28 and will take public comments before it aims to finalize the rules later this year. A separate order proposed by Wheeler to be voted on this month would bar some existing contract requirements by special access providers.

(Reporting by David Shepardson; editing by David Gregorio, G Crosse)