It wasn't so long ago that many of us were locked into lengthy cellphone contracts. And if you wanted to leave your carrier, you faced the prospect of stiff early termination fees.
The same situation affects many hospitals, schools, universities and banks that all need data connections to run their businesses. These fees end up making it harder to switch providers, just like for regular consumers. Now, federal regulators on Thursday have voted to ban these and other provisions that telecom providers sometimes impose on their corporate customers.
The Federal Communications Commission also voted to start the process of redesigning the rules that govern the $45 billion nationwide market for business broadband. The proposal is aimed at increasing competition so that large, institutional customers can have more flexibility to choose a telecom provider.
Many retailers use business broadband to handle financial transactions, such as ATM withdrawals or credit-card swipes. Cellular carriers use the same connections to send voice calls behind the scenes over vast distances. And experts expect these networks to begin carrying even more traffic as consumers shift more of their data consumption to mobile and future-oriented 5G networks. That's why the market for business data services is so important.
"There is a reason why all the major wireless carriers, save one, support this item," said FCC Chairman Tom Wheeler. "Because it's essential to wireless competition."
Earlier this month, Verizon struck a compromise with smaller competing carriers over business broadband, adopting a set of guiding principles that are designed to guide its behavior as it participates in the FCC rulemaking process, which will take a matter of months.
The business broadband industry has historically been dominated by big, incumbent telecom companies, such as AT&T and Verizon. Some of their practices included "tie-ins," a tactic in which a carrier would offer service to an institutional customer in one part of the country, but only if the customer agreed to buy service in another part of the country, too.
The FCC's 3 to 2 vote Thursday moves to block these types of practices, including early termination fees, when it comes to providing business data connections over traditional technologies like copper wiring. And it opens up a process to design new rules for the industry that would allow the FCC to impose pricing regulations on markets it deems uncompetitive. Factors that go into that calculation could include the number of providers in a given area; the kinds of speeds that are offered; and whether there's enough service to meet the needs of different businesses.
Importantly, the new rules could also apply to a relatively new player in the market for business broadband: cable companies. This industry, which is a giant in providing home Internet access, has been encroaching on the likes of Verizon and AT&T when it comes to providing data to institutional customers.
"Cable’s entry into the market for business data services over the last few years has resulted in improved services and lower prices for businesses all across America," said the National Cable and Telecommunications Association, a top cable trade group in Washington. "It is disappointing that Chairman Wheeler is responding to this unquestionably positive development by asking the commission to consider imposing onerous new rate regulation on these competitive services."