Credit: Shutterstock photoThe Business Data Services (BDS) market, where telecom and cable multi service operators (MSO) provide a host of different network related services to business entities of different sizes, have been a lucrative source of revenues in the recent years for telecoms and cable MSO's. Notably, these service providers have been gaining generous revenues from the small and medium businesses (SMB) by often charging high prices.
As per the Consumer Federation of America, the trend has led to overcharging of services to the tune of $75 billion in the past five years. Consequently, the Federal Communications Commission (FCC) has proposed rules to regulate pricing in the market, citing low competition. However, such proposals have been criticized by the industry players except for certain smaller companies like Sprint Corp. S and T-Mobile US Inc. TMUS .
Recent Trend
BDS market was dominated by telecom players like AT&T Inc. T and CenturyLink Inc. CTL . However, lucrative revenues and growth prospects of this particular industry has attracted many cable MSO's of late, with Charter Communications Inc. CHTR and Comcast Corporation CMCSA jumping on the bandwagon to provide data related services to the SMB's. This has resulted in significant fiber investments across the country, even in the rural regions to reach out to businesses.
Notably, the cable MSO's have been focusing in this particular segment after facing depressing revenues in their video service offering. Thus, both the cable MSO's and telecom operators now have a substantial exposure to this segment.
Reaction to the Proposal
Industry response of this FCC proposal has been outright negative. Telecom players contend that after the influx of cable MSO's in the market, the competition has increased. Additionally, it highlighted that lower pricing would restrain them from deploying future technologies such as 5G wireless services. The cable MSO's too share a similar view, as they pointed out that regulating prices would lower return on investment, acting as a deterrent for future fiber investment.
The Bottom Line
While the whole industry lobbies to stop the regulation coming into effect, we must note that a price regulation will certainly help the small businesses which often face high charges for using data services. However, if FCC does go in favor of a regulation, the network footprint expansion across the country will be impacted, especially in rural areas. This can affect the smooth functioning of their business operations.
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AT&T INC (T): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
