fiber buildingWith the FCC poised to regulate business data services, opponents are arguing vociferously about the extent of competition in the business data services (BDS) market – and a critical issue is whether Ethernet over HFC counts as a business data service. According to an Ethernet over HFC definition provided by financial analysts at Bernstein Research in a recent research note, the answer is not a simple one.

“Over the next few months, we expect the competitive effects of cable’s business services on BDS pricing to be one of the more prominent controversies,” the Bernstein analysts wrote. The reason, the analysts said, is that “the major [cable companies] can provide relatively low-capacity (10 Mbps or slower) symmetric Ethernet services across most of their hybrid-fiber-coax footprints with [quality of service] guarantees.” While the QoS guarantees in the Ethernet over HFC definition are “less stringent than those available when dedicated fiber is used,” they are more stringent than those accompanying cableco best-efforts services such as residential Internet access over DOCSIS 3.0, the analysts noted.

Why Ethernet over HFC Definition Matters
The FCC has proposed to regulate business data services in areas where the commission determines that competition is insufficient – and according to the FCC, many areas lack competition. The FCC based that analysis on information about data services gathered from service providers and their customers.

According to the FCC definition, Internet access services that do not offer QoS guarantees are not business data services. Therefore the commission did not include cable company DOCSIS-based data services in gauging competitive business data services options.

Based on that analysis, only 23% of buildings and cell towers can obtain business data services from two or more facilities-based providers, according to a summary chart provided by Bernstein Research.

But according to several major telecom and cable companies, Ethernet over HFC supports QoS guarantees and should count as a business data service.

Major cable companies initially did not include information about Ethernet over HFC availability when they reported to the FCC about business data service availability. But if DOCSIS 3.0 infrastructure can easily support Ethernet over HFC – as, according to the cable companies, it already does in many areas – the competitive picture could be considerably different, according to the cablecos.

According to Bernstein Research’s summary of the FCC data, the percentage of buildings with two or more business data services would rise to 86% if DOCSIS 3.0-based services were included.

Berstein Report
Bernstein Report (Source: FCC, Bernstein Analysis)

Recent comments from FCC Chairman Tom Wheeler suggest he isn’t buying the argument that the Ethernet over HFC definition qualifies it as a data service – and considering that he and other Democrats represent the majority on the five-member commission, it would appear that the commission is likely to go ahead with plans to regulate business data services. But even if that occurs, cablecos and some of the incumbent telcos are likely to continue to fight the decision, which means we’re likely to hear continued debate moving forward about whether Ethernet over HFC is a business data service.

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