Wednesday, October 24, 2007

A Bundle of Unbundling

For many many months now, I have been saying that, in one fashion or another, many of the hot-topic communications policy issues involve this question: Will the government require broadband operators such as AT&T, Comcast, or T-Mobile (by way of example) to unbundle transmission services, applications and content?

As I have pointed out many times, unlike the case of the accurately named “Unbundled Network Elements” regime, some of today’s regimes that have already or would impose unbundling mandates don’t advertise that fact as explicitly. Rather they have more felicitous-sounding monikers, such as Open Access or Net Neutrality. No matter. Even when the unbundling mandate is not spelled out in so many words, it is there. By virtue of requiring a non-discrimination obligation, unbundling necessarily must be implemented in openness and neutrality regimes. Why? Because, in the end —that is, at the end of all of the rulemaking and the regulatory and judicial litigation— there is no way to enforce a non-discrimination mandate that requires all to be treated equally without unbundling elements that otherwise might be integrated. Absent unbundling, there is no basis for gauging equal treatment.

Here are some current issues before the FCC that involve unbundling of transmission, applications, and/or content:

· 700 MHz Proceeding: In July, the Commission adopted an order mandating that the winner of the 700 MHz C Block spectrum auction operate on an open platform basis. This means that the wireless provider must not discriminate in allowing third party devices and applications access to its network. When all gets said and done, the only way to enforce the non-discrimination obligation is to require unbundling of the elements of the network operator’s own services, equipment, and applications.

· Net Neutrality Obligations: The FCC is exploring whether to impose net neutrality obligations more generally on wireless providers, and it already has adopted generic net neutrality principles and employed them to impose net neutrality obligations on providers in the context of merger proceedings. At the heart of the net neutrality obligation is the non-discrimination obligation with respect to the applications, content, and devices of entities unaffiliated with the broadband operator. Once again, an unbundling requirement is a predicate for enforcing the neutrality mandate.

· Open Cable: The FCC is considering whether it should adopt regulations that dictate the extent of “openness” required in digital cable ready equipment. The cable industry has developed a platform that it calls OpenCable that employs a “middleware’ solution to enable third parties such as television manufacturers and applications and content providers to develop and deliver a host of new two-way interactive services using the Open Cable standards. But the consumer electronics industry is asking the FCC to require still more mandatory unbundling of the digital cable ready platform.

· A La Carte Mandates: The FCC Chairman has suggested that cable operators ought to be required to offer their program channels on an a la carte basis so that the subscriber pays only for those individual channels to which he or she wishes to subscribe. The unbundling in this instance is explicit and obvious.

· Must Carry and Leased Access Mandates: These are mandates that require cable operators (and surely other broadband providers to follow) to set aside capacity on their own networks for use by third parties. In essence, the service provider is required to unbundle capacity on its network so that the separated capacity can be used by an unaffiliated party.

Note that I haven’t addressed the question whether the unbundling mandates in each of these instances are justified. Regular readers of this space know that, in general, I do not believe they are. This is because, considering today’s increasingly competitive and technologically dynamic communications marketplace, I believe it is counter-productive and costly —in terms of chilling investment, innovation, and more facilities-based competition— for the FCC to attempt to micromanage broadband operators’ business models, while modeling what it considers to be ideal competitive outcomes.

Absent instances of demonstrable market failure, which I don’t see, broadband providers ought not to be locked into “unbundling” straight-jackets that prevent them from responding to changing consumer demand in the most efficient and innovative ways, including ways that integrate services, applications, content, and equipment. The FCC ought not risk becoming known, however informally, as “The Federal Unbundling Commission.”

But don’t get me started.

For all I really want to do here is to provoke your thinking on this subject and, of course, entice you, if you haven’t already signed up, to attend the “Federal Unbundling Commission?” conference sponsored by the Free State Foundation and the Institute for Policy Innovation on Tuesday, October 30. Senator Jim DeMint and Representative Marsha Blackburn, two of the most market-oriented and influential telecom policy leaders, will deliver keynote addresses discussing these issues. FCC Commissioner Deborah Taylor Tate will be there. And the issues will be addressed by two panels, one comprised of industry representatives and the other of expert scholars.

Since the conference, including lunch, is free, I can’t guarantee your money back if you are not satisfied. But I do guarantee you will know a lot more about the impact of various net neutrality, open access, and unbundling mandates when you leave than you did when you walked in the door.

Information about the conference is here. To register, rsvp to Erin Fitch at or 972-874-5139.