Are Verizon and AT&T ‘locking up’ the market for business Internet? The FCC will investigate. (updated)

The Federal Communications Commission announced a probe into the $40 billion market for business broadband, responding to accusations by Sprint, Level 3 and others that large Internet providers — chiefly AT&T and Verizon — have tried to lock up the market for high-speed data connections powering everything from ATMs to credit card readers to Web connections at offices, universities and libraries.

The agency plans to examine the terms and conditions of contracts worth roughly $20 billion for "special access" services. It won't investigate the prices large incumbents charge to rivals and business customers, but AT&T warned in a statement that the FCC's probe could lead to the agency directly regulating the prices it and other companies could charge for business broadband.

Among the practices the FCC will look into? Contracts that last as long as 7 to 10 years, which critics say suppresses competition by making it impossible for would-be challengers to lure those customers away. Also, high fees that allegedly deter business customers from switching providers or canceling service, because it would be more expensive to do so than to continue paying for service. The investigation, according to an FCC official, will also consider so-called "percentage commitments." These deals force companies to buy a certain amount of their total broadband service from a given provider — or face penalties or restrictions.

Update:

The following statement may be attributed to Frank Simone, AT&T Vice President of Federal Regulatory:

“According to Chairman Wheeler the need for FCC intervention decreases in a competitive marketplace. That’s why today’s designation order is so perplexing. Opening a tariff investigation on special access services is a step towards rate re-regulation in a space that is highly competitive and getting more so as cable companies and other new entrants aggressively compete. The terms the Commission is reviewing are commonplace in most commercial contracts and in fact are being used by our competitors in their own contracts. Each day the Commission wastes investigating and interfering in commercial agreements between companies that build infrastructure and those that do not is a day it is not encouraging fiber investment or looking boldly towards the benefits those investments will provide to consumers.”