Thursday, July 17, 2008

Forbearance Relief: More on Rearview Mirror Regulation

In a blog yesterday, I said that all too often, when the FCC acts, it appears to be looking through a regulatory rearview mirror, rather than looking forward. I had in mind then reports that the Commission may be considering adopting an enforcement action against Comcast regarding its past network management practices. Today, the rearview mirror regulatory phenomenon comes to mind with respect to reports the Commission plans to deny Qwest's forbearance requests for regulatory relief in four urban markets, even in the Phoenix market, which appears the most competitive.

I have said many times that, in my view, the Commission errs in taking a much too static view, rather than a more dynamic one, when it considers forbearance requests. It too easily retreats into this mode, even though at other times it recognizes that, indeed, the telecommunications marketplace is anything but static. For example, in an order issued last year granting AT&T's forbearance request for regulatory relief for certain broadband serivces, the Commission considered potential competition and "the emerging and evolving nature of this market." It concluded that in light of these factors, it "would not give significant weight to static market share information in any event."

In the event of considering all forbearance requests, the Commission should not give undue weight to static market share information. Thanks largely to the rapid pace of technological change facilitating new market entry, the communications marketplace is characterized by dynamism. According to trade press reports, the Commission staff's draft analysis of the Qwest petition doesn't take into account wireless subscribers who have "cut the cord." Apart from any other aspect of the staff's analysis, this doesn't seem to make any sense. Surely, the rapidly growing number of those who are discontinuing landline service is one important indication that non-Qwest competitive alternatives are now available. There are other indications as well, of course.

All the evidence must be considered. But to ignore the cord-cutters seems akin to the railroad regulators ignoring competition for freight carriage from the trucking industry and the airplanes when they came on the scene. Come to think of it, thanks in large part to Jimmy Carter's efforts, the railroads, truckers, and airlines have all been deregulated for nearly three decades.

The FCC needs to check itself --constantly -- to avoid the rearview mirror regulatory phenomenon, especially when it is considering forbearance requests. As I explained in a recent paper, "Why Forbearance History Matters," when Congress included the unique forbearance authority in the Telecom Act of 1996, alongside the periodic regulatory review requirments, it meant for forbearance to be used by the FCC as a deregulatory tool to address changing market conditions.