Sunday, January 30, 2011

Broadband Policy: One Year After the National Broadband Plan

"Broadband Policy: One Year After the National Broadband Plan" is not only the title of this blog, but just happens to be the theme of the Free State Foundation's Annual Winter Telecom Policy Conference this Friday at the National Press Club.

A mere coincidence – but at the bottom of this blog I might well plug the conference anyway.

In anticipation of the conference, and especially in light of the FCC's recent actions in two major proceedings, I have been thinking a lot about where communications policymaking stands now, and why. You may have guessed that the two actions I have in mind are the Commission's adoption of net neutrality regulations and its approval of the Comcast-NBCU transaction. That these actions are important is signified not only, or primarily, by the length of the opinions and orders (130+ pages for net neutrality and 270+ pages for the Comcast-NBCU transaction). They are important, most fundamentally, for what they tell us about the Commission's approach to regulation at this point in time.

And what they tell us, simply put, is that the Commission majority's mindset remains largely stuck in the regulatory paradigms that were developed in the analog age when both the telephone and broadcast environments were largely monopolistic. In today's parlance, I would say the Commission just doesn't "get it" – get that the digital revolution, and the concomitant switch from narrowband to broadband communications, has enabled the development of a multiplatform digital communications environment that is largely competitive across most services, whether we call these services "video, "voice," or "data."

Despite whatever the Commission otherwise may say, its actions speak louder than its words. Faced with a choice, the agency continues to choose to regulate communications and information service providers under broad, ill-defined standards, rather than opting to rely on the discipline of the competitive marketplace to protect consumers. Continually invoking language at the heart of the analog-era regulatory paradigm – "public interest," "reasonable," "unreasonable," "fairness," and "non-discrimination" – the Commission clings tenaciously to the exercise of regulatory power. Acting under the guise of "reasonableness" and the "public interest" and so forth, it exercises this regulatory power in the name of ensuring "fair competition" or "leveling the playing field," all the while picking marketplace winners and losers – and all the while disclaiming it is doing any such thing.

Of course, one could write a book about this, and I am beginning work on one. But here I just want to comment very briefly on the net neutrality and Comcast-NBCU orders to illustrate my point. With respect to net neutrality, the Commission deliberately eschewed reliance on any findings concerning marketplace competition and consumer harm in deciding to adopt neutrality mandates. Instead, in the key provision prohibiting Internet providers from engaging in "unreasonable discrimination," without finding market failure, the agency clung to the analog-era paradigm. This anti-discrimination mandate, applied to "common carriers" in Section 202 of Communications Act of 1934, originated in the Interstate Commerce Act of 1887, and was first applied to telephone companies in the Mann-Elkins Act of 1910.

It is now 2011.

In approving the Comcast-NBCU order, the Commission attached 25 pages of very detailed conditions governing many aspects of the business practices of the combined company over the next seven years. This in a multi-channel video marketplace the Commission continually has found, in a series of lengthy studies over many years, to be competitive. While the conditions are wide-ranging, from implementation of program access and program carriage mandates to requirements for sharing Comcast-NBCU programming with online video providers, in large part they are grounded the common element that alleged violations are to be judged lawful or not by the Commission (or arbitrators) based on whether they are "reasonable" or "nondiscriminatory" or reflect "fair market value" or the like. Indeed, a reasonableness requirement alone is found 14 times in the conditions.

And to further illustrate where this reliance on "reasonableness" leads: In the condition that requires Comcast to continue to offer stand-alone broadband service, the Commission mandates that it must do so at "reasonable, market-based prices." On what basis is the Commission going to determine that market-based prices are unreasonable? I would have thought that, if market-based, in a competitive market, by definition – or, at least presumptively – they would be reasonable.

There are many other examples that could be cited. But the main point here is that the Commission, at least in the form of its present three-person majority, exhibits unbounded – but unwarranted -- confidence in its ability, notwithstanding the dynamic marketplace and technological changes, to make judgments as to what is "reasonable" and "fair" and "nondiscriminatory" and in the "public interest. " There is no need to question the good faith of commissioners who hold fast to reservations of authority based on such open-ended legacy standards. But there is reason to question their judgment that consumers are better served by an agency mindset which eschews reliance on standards grounded in findings of marketplace competition and demonstrable consumer harm.

I'd like to see the Commission adopt a more free market orientation on any number of issues, and I'll certainly keep advocating for more market-oriented policies which reflect today's competitive realities. But as my mother often said, "it may take an act of Congress." And so it may. A big project still to be accomplished.

In the meantime, which in this case is likely not to be a short time, there is much the Commission can still do – one year after release of the National Broadband Plan – to improve communications policymaking. After a decade of delay – yes, a decade – everyone knows the antiquated universal service/inter-carrier Compensation regime is in need of radical overhaul. It is widely acknowledged that spectrum policy and spectrum assignments do not serve the nation well because they are grounded in legacy approaches. There are real questions about whether it makes sense for the Commission to dictate technological designs, for example, with respect to video navigation devices, or business practices, with respect to wireless termination fees and usage cap alerts.

In my view, there are distinctly free market-oriented solutions that should be brought to bear in resolving each of these policy issues. But I recognize there are other, different views as well on all these issues.

That's why I am excited, and getting more so as I put finger to keyboard, about FSF's upcoming February 4 conference. I assure you that there will be vigorous, but respectful, debate that reflects divergent philosophical perspectives and differences of opinion on specific issues. And there will be time for audience participation as well.

So, I hope to see you on Friday. The conference agenda is here. FCC Commissioners Meredith Atwell Baker and Robert McDowell, in keynote roles, lead an all-star lineup. Space is quickly becoming limited, so please don't just show up without registering. You may register by rsvp-ing to Kathee Baker at