A Federal Communications Commission decision to eliminate price caps in much of the business broadband market can remain in place after a federal judge denied a petition to halt the FCC order.

The FCC's Republican majority in April imposed a new standard that deems certain local markets competitive even when they have only one broadband provider. In those markets, incumbent phone companies like AT&T, Verizon, and CenturyLink will be able to charge higher prices for business data services that are delivered over copper-based TDM networks.

Companies that will have to pay higher prices sued the FCC. They asked for a stay that would halt the elimination of price caps pending the outcome of the case. But yesterday, the US Court of Appeals for the 8th Circuit denied the motion for stay. The order provided no explanation for the denial.

Any ISP within a half-mile is a “competitor”

The FCC's decision eliminates price caps in a county if 50 percent of potential customers "are within a half-mile of a location served by a competitive provider." A county is now also considered competitive if 75 percent of Census blocks have a cable provider. (There are no price caps for cable-based business data services.)

The motion to stay the FCC order was filed by BT Americas, the trade group Incompas, the Ad Hoc Telecom Users Committee, and Windstream.

The petitioners argued that they were entitled to a stay because they are likely to prevail on the merits of the case, though the court disagreed. The FCC's new definition of competition "invented a new type of market participant: a so-called 'nearby competitor,'" the petitioners wrote. "This 'competitor' does not meet any established meaning of the term, including under Commission precedent."

Even in markets where there is both an incumbent and a competitor, prices won't necessarily go down, the petitioners argued. The FCC "failed to cite any record evidence to support its conclusion that two [providers] are enough" to lower prices, the petitioners wrote. Competitors must pay significant costs to build out to new customers and won't necessarily charge less, the petition said.

“Higher prices, lower quality”

Fewer than 10 percent of potential customers will benefit from price controls under the new procedure, FCC Commissioner Mignon Clyburn, a Democrat, said before the April vote. The new rules took effect on August 1, allowing phone companies to stop filing tariffs and raise prices.

"The Order permits the incumbents to raise prices or shut off access to these critical inputs, disabling competitive carriers as they battle the incumbents for retail customers," the petition for a stay of the order said. "In turn, business customers face higher prices, lower quality, and less innovation."

FCC Republicans argue that nearby ISPs are more willing to extend their networks to nearby customers when there are no price caps. FCC Chairman Ajit Pai cheered the ruling:

The court's decision to let our modernization of our business data services rules take effect is an important—though unsurprising—affirmation that the Commission thoroughly analyzed our massive data collection to establish a robust, forward-looking competitive framework. These reforms will encourage vigorous investment in next-generation networks, which is critical if we are going to bridge the digital divide in our country.

Business data services, formerly known as special access, are commonly used for "connecting bank ATM networks and retail credit-card readers [and] providing enterprise business networks with access to branch offices, the Internet, or the cloud," the FCC has said. The services are also used by wireless carriers such as Sprint, and the prices thus have an indirect impact on the prices consumers pay for mobile broadband. The FCC imposes no price caps on consumer Internet services.