Monday, March 15, 2010

Red Flags Over The FCC's Broadband Plan

Politico has posted what is described as a late draft of the executive summary of the FCC's "National Broadband Plan." Here are some quick reactions.

Foremost, the plan is breathtaking in its scope, although some of the goals propounded are clearly hortatory and admittedly long-term. As for the scope, I do not think it is ungraceful to acknowledge the hard work and good faith of Blair Levin and his team, while at the same time suggesting that an overly ambitious and diffuse plan, with too much government direction, ultimately is likely to make it more difficult to achieve the widely shared goal of getting broadband to the increasingly few unserved areas and the increasingly few unserved citizens. At least ot achieve that goal in a sound and economic fashion.

The plan's overly ambitious scope is somewhat at odds, right from the outset, with this up-front acknowledgement:

"Fueled primarily by private sector investment and innovation, the American broadband ecosystem has evolved rapidly. The number of Americans who subscribe to broadband has grown from eight million in 2000 to nearly 200 million last year. Increasingly capable fixed and mobile networks allow Americans to access a growing number of valuable applications through innovative devices."

Here are a few specific (not meant to be exhaustive) red flags based on the leaked executive summary:

· The suggestion of a "comprehensive review of wholesale competition rules" to ensure competition is troubling. In plainer English, this means considering requiring that some Internet service providers unbundle and share their networks with other would-be competitors. The FCC tried that approach of "managed competition" in the late '90s in implementing the Telecom Act of 1996. The result was not pretty. Investment was stifled. The court ultimately overturned the FCC's mandatory sharing rules – but not before a lot of damage was done. The FCC shouldn't even start down this road again.

· The focus on freeing up and allocating "unlicensed spectrum" is misplaced. Licensing spectrum, and creating property-like rights, ensures that the spectrum resource will be developed to its highest and best use. Consumers and taxpayers are the beneficiaries.

· The proposal to consider conditioning a spectrum block on the offering of a free or low cost service should be rejected. It is an uneconomic and inefficient way of addressing a problem that, if it exists, should be addressed on a narrowly targeted basis that provides support to low-income persons. Conditioning spectrum disserves consumers and taxpayers.

· The proposal to create new Connect America and Mobility Funds are problematic. It looks like, with the Universal Service Fund tax now at 15% on all interstate calls, the plan's drafters recognize that the legacy USF fund supporting voice calls no longer represents sound policy, if it ever did. The problem is that the plan apparently envisions creation of new mechanisms that will work somewhat similarly to the existing regime by collecting fees from telecom users assessed on the services they use. This approach provides government administrators with an unending pot of money to spend with no endgame in sight or defined. The money keeps flowing arguably long after even any perceived problem has been addressed. Witness the difficulty in reforming the existing universal service regime, more than a decade or so after nearly all economists agreed the program had outlived its usefulness. So, here, the plan proposes an overly long transition period of another ten years to sunset the support of the existing voice regime. A better approach is to have Congress appropriate funds directly from the Treasury, so there is greater accountability to the public, and to rely on Linkup-LifeLine programs (which the plan proposes) to provide targeted support to low-income persons who need subsidies to acquire service.

· The executive summary refers to "creating a robust public media ecosystem and modernizing the democratic process." Suffice it to say here that when government officials propose getting into the business of creating and foster the "public media" it inevitably means they will end up exercising control over the media they create, even though they will almost always deny it. This is troubling for many reasons, not least of which is the jeopardy to the First Amendment. Those who are some of the fiercest advocates of creating public media tend, whether inadvertently or advertently, not to recognize that the First Amendment is intended to protect against government censorship and control, not to offer cover for increased government control or interference with the media.

As for "modernizing the democratic process"? It should be enough to say great caution is warranted here. The Founders did a pretty good job, and they should be looking on at this effort warily.