The proposals extend the FCC’s deregulatory agenda for telecoms, picking up prior efforts to incentivise investment in next-generation networks to serve the business market
The FCC proposes ending ex-ante regulation of business broadband services
On 7 August 2025, the US Federal Communications Commission (FCC) voted to approve a Notice of Proposed Rulemaking (NPRM) on deregulating the market for business data services (BDS), which the regulator defines as “the dedicated point-to-point transmission of data at certain guaranteed speeds and service levels using high capacity connections”. The regulator is proposing to remove ex-ante pricing regulation on former incumbent local exchange carriers (ILECs) in advance of a planned triennial review of the market that was due to be completed by January 2026. Specifically, the changes would end pricing regulation on: terminating segments of legacy dedicated capacity networks, referred to as end user channel termination services, in both competitive and non-competitive areas; and trunk segments, referred to as transport services, in non-competitive areas only. In his statement on the proposed changes, Brendan Carr (Chair, FCC) described how regulation had disincentivised investment in network development and how “deregulation and building go hand-in-hand” and will spur investment “in the technologies of the future, not the past”.
The changes would continue a deregulatory trend established in the first Trump Administration
The FCC has been historically empowered to regulate rates for telecoms services to ensure their provision is “just and reasonable”, dating back to the Communications Act 1934. In the business market, the regulator has achieved this standard by enforcing two forms of ex-ante regulation: rate-of-return regulation, which sets the maximum rate of return above the cost of capital that operators are permitted to charge; and price cap regulation, in which the regulator applies an economy-wide productivity gain factor to former incumbents’ pricing. Rate-of-return regulation tends to apply in more rural and less densely populated regions (therefore less competitive typically), and price cap regulation applies in urban areas. As of 2017 and during the first Trump Administration, the FCC decided not to regulate packet-switched (namely IP-based) and higher capacity circuit-switched dedicated capacity in both terminating and trunk segments for all price cap regions and about one-third of rate-of-return regions, an example of the regulator’s forbearance authority through which it is empowered to offer relief from specific regulation in the name of the public interest. Where ex-ante regulation has remained, its imposition has been conditioned on the completion of a competitive market test to confirm that former incumbents hold sufficient market power that they could distort pricing locally.
The FCC estimates that former incumbents could save $1m in compliance costs alone with these changes
The proposed changes within the NPRM would end pricing regulation in lower capacity dedicated access in both trunk and terminating segments. The competitive markets test would also be retired in the absence of ongoing ex-ante regulation. In justifying its rationale, the FCC describes how both the transition to IP-based services and the growth in competition from cable providers has resulted in a rapidly declining market for legacy BDS. Within the notice, the FCC does however invite comment on why specific sectors or businesses may elect to continue using these legacy services, including on any sectoral regulation that may require it. The regulator also seeks further information on the deployment of alternative technologies, including fixed wireless access (FWA) and satellite, within the business market. Should it choose not to deregulate these services, the FCC proposes an alternative set of changes to the competitive market test, seeking feedback on the inclusion of other technologies such as FWA in its analysis, the creation of a speed threshold for services and the measurement of availability of services on a location level (as opposed to by the census block). If the regulator does move forward with deregulation, the FCC’s order would enforce a 24-month transition period, shortened from 36 months in similar prior rulings, and a further six-month rate freeze period. In addition to incentivising investment in next-generation networks, the FCC also states that it believes these changes would result in an estimated $1m (£743,000) savings in compliance and filing costs alone for former incumbents.
