As a result the FCC has recognised the "strong competition" in the BDS market and decided to remove some legacy regulation which may be holding back network investment. In particular, it sees competition for packet-based services at speeds exceeding 45 Mbps (the top speed of TDM DS3 services) as widespread, making pricing regulation counterproductive for these services.
The FCC's order adopts a competitive market test which determines that pricing regulation is no longer required when either of the following conditions are met: 50 percent of the buildings in a county are within a half-mile of a location served by a competitive provider, or 75 percent of the census blocks in a county have a cable provider present. After a transition period, ILECs in counties meeting the competitive market test will no longer be required to file tariffs with the FCC. However, rates must continue to be "just and reasonable" or could face a court or regulatory challenge. In counties that do not meet the competitive market test, the order retains price regulation for lower speed TDM connections to end-users.
In addition, the order allows ILECs to offer volume and term discounts, as well as contract tariffs (known as 'Phase I pricing flexibility' under the FCC’s old rules). It also extends uniform forbearance for ILECs from certain rules that had previously been granted unevenly. This change includes forbearance from tariffing for all packet-based BDS.
Where price cap regulation the FCC plans to reduce the cap annually by 2 percent going forward to account for productivity gains. This productivity adjustment is known as the X factor and has not been adjusted since 2005, when it was set at the rate of inflation. The new X-factor takes effect on 01 December.
