• FCC acting after investigation on business-data deals
  • Proposal by agency to face vote at April monthly meeting

Phone companies such as AT&T Inc. and Verizon Communications Inc. would need to ease some terms they offer competitors renting lines that carry data for businesses under a proposal unveiled Friday by regulators.

A proposed order by the U.S. Federal Communications Commission would prohibit some contract terms that have been demanded by the two largest carriers and by Frontier Communications Inc. and CenturyLink Inc., according to officials who spoke on the condition of anonymity because the proposal hasn’t been publicly released.

The business data services at issue are dedicated network connections often used by banks, manufacturers, schools and other organizations that need to transport large amounts of data. They include, for instance, the lines connecting cash-dispensing automated teller machines to banks and credit unions.

The proposal from FCC Chairman Tom Wheeler will be voted on at an April 28 meeting. His proposals generally pass because he is part of the commission’s Democratic majority.

Wheeler said in a blog post that the commission will also consider new rules intended to bring more competition to the business-data market, which is changing as cable providers and Internet technologies provide services once limited to older networks.

Important Market

The market is “little known but hugely important in our connected society,” Wheeler said. “These dedicated network connections are used by offices, retailers, banks, manufacturers, schools, hospitals and universities to move large amounts of data.”

Competitive carriers reach fewer than 45 percent of the locations where there’s demand for business services, Wheeler said.

Under Wheeler’s proposed order, the carriers couldn’t demand excessive penalties for terminating contracts early, or for falling short of expected data traffic, the officials said. They said another contract feature is to be banned: that of demanding that all purchases in a region be folded into a single contract, a practice that can crimp flexibility in meeting new demand. The officials declined to list which tactics were used by each of the four named companies.

Competitors that rent the lines for their customers’ traffic, such as Sprint Corp. and Level 3 Communications Inc., had told the FCC they’re unfairly treated -- an assertion rejected by AT&T and Verizon, which said contracts are forged as part of a competitive market.

The proposed order is the next step in an investigation announced last year, when the FCC said it had found “potentially unjust and unreasonable practices.”

No. 4 U.S. wireless carrier Sprint in a filing said the market for business data lines is “fundamentally broken.” Companies renting lines must agree to buy most of their needs from one provider or face high rates, Sprint said. Sprint and other wireless carriers use the lines to connect cell towers to wired networks.

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