Sunday, October 09, 2011

Communications Law and Policy in the Digital Age: The Next Five Years

While I certainly didn't agree with all that he did, readers of this space know that I have great respect for former FCC Chairman William Kennard, now the U.S. Ambassador to the European Union. Kennard was appointed FCC chair by President Clinton and served in that capacity from November 1997 – January 2001.

One of the FCC's most significant decisions under Bill Kennard's leadership was to resist pleas in the late '90s to regulate then-emerging cable broadband services like telephone common carriers. In 1999, Kennard declared: "So, if we have the hope of facilitating a market-based solution here, we should do it, because the alternative is to go to the telephone world, a world that we are trying to deregulate and just pick up this whole morass of regulation and dump it wholesale on the cable pipe. That is not good for America."

This was an important milestone in keeping broadband Internet services free from legacy common carrier regulation. The current FCC, under the leadership of FCC Chairman Julius Genachowski, unfortunately took a step backwards last December when it adopted net neutrality regulations governing broadband Internet providers. A backwards step that, unless reversed, thrusts Internet providers, at least somewhat, back into the morass of the "telephone world."

Before he left the agency, Chairman Kennard released a "Strategic Plan: A New FCC for the 21st Century." Again, because I have often quoted from the plan, readers must know by heart the August 1999 document's first sentence: "In five years, we expect U.S. communications markets to be characterized predominately by vigorous competition that will greatly reduce the need for direct regulation."

Bill Kennard had that right, and I often think about his strategic plan for transitioning within five years – that is, by 2004 -- to a vigorously competitive marketplace environment with a greatly reduced need for regulation. I have this vision in mind today as I think about the Free State Foundation's upcoming fifth anniversary celebration. For the theme of the event is: "Communications Law and Policy in the Digital Age: The Next Five Years."

The simple truth, in my view, is that the FCC has been much too slow to reduce outdated regulations. And, what's worse, it has gone merrily about adopting new ones – net neutrality mandates, for example – that are entirely unsuited to the digital age competitive environment.

Today, and especially with the economy in such difficult straits, the FCC's default position should be "no new regulations" without a compelling showing of existing market failure and consumer harm. In other words, the default position should be not to regulate absent a compelling showing of need. Too often today, the presumption is the other way around. In addition to net neutrality, the agency's proposed "bill shock" and All-Vid" rules come to mind as examples of costly new regulations that don't pass the compelling need test.

By suggesting a change in the FCC's pro-regulatory mindset – that is, a change in its default position – I don't mean to suggest there is not some important work for the agency to do. There is, and, if done properly, this work can make a contribution to the nation's economic recovery. Done improperly, vice versa.

Here is a short-hand version of a brief list of what I have in mind.

·      USF/ICC Reform: In the next few weeks, the FCC will consider reform of what FCC Chairman Julius Genachowski on October 6 called the "wasteful," "inefficient," and "unfair" Universal Service/Intercarrier Compensation regimes. Reform of these outdated legacy regimes, so that at least they would be meaningfully less wasteful, less inefficient, and less unfair than today, will require the agency to adopt a hard cap, without loopholes, for $4.5 billion per year for the high-cost subsidy fund, along with a transition plan to sunset the high-cost fund in, say, ten years. The need for further subsidies can be evaluated at that time. There is no justification, in light of the rapidly changing technological and marketplace environment, to adopt a brand new "universal service" regime, funded by America's consumers, with ongoing, interminable subsidies. And the Commission should ensure subsidies only go to support unserved areas.

·      Spectrum Policy: Most immediately, the spectrum ball is in Congress's court, and Congress should act promptly to grant the FCC authority to conduct incentive auctions as a means of getting underutilized spectrum into the hands of those who value it more highly. Obviously, the FCC will have an important role to play in implementing the auctions. In the past, imposed auction conditions that supposedly furthered one of another pet social policies. The FCC's 700 MHz auction, in which the agency under FCC Chairman Kevin Martin's leadership imposed a net neutrality condition, is a case study in how the FCC should not conduct an auction. For the benefit of both consumers and taxpayers, auctions should not be burdened with extraneous conditions.

·      Merger Reviews: I've written very often about the need for the FCC to reform its merger review process. The agency should focus only on alleged transaction-specific anticompetitive harms, rather than using the review process as an opportunity to impose far-afield conditions that should be considered, if at all, in a generic rulemaking. Over time, the Commission's merger reviews increasingly have come to resemble, as I put in several years ago, a "bizarre bazaar," at which special pleaders, competitors and others, beseech the agency to impose conditions unrelated to any credible transaction-specific harms.

·      Internet Regulation: And, yes, if Congress or the courts do not overturn the Commission's net neutrality regulations, much will depend on the extent to which the agency implements them. Assuming the regulations remain on the books, it will be incumbent on the FCC to interpret and enforce them with sufficient flexibility and reasonableness that Internet providers retain incentives to invest in new facilities and continue to innovate.

As I said above, this is intended only to be a short-hand description of a short list of work confronting the Commission over the next months and years.

Well, to be candid, it is intended also as a bit of a teaser for the Free State Foundation's Fifth Anniversary Celebration Lunch this Wednesday, October 12, at the Mayflower. The event's theme is: "Communications Law and Policy in the Digital Age: The Next Five Years." We have a great line-up of speakers: Senator Jim DeMint, Ranking Member, Senate Subcommittee on Communications, Technology, and the Internet; Rep. Marsha Blackburn, Vice-Chair, House Energy and Commerce Committee's Subcommittee on Commerce, Manufacturing, and Trade; and Rep. Cliff Stearns, Chairman, House Commerce Committee's Subcommittee on Oversight and Investigations. Each of these members of Congress is an acknowledged leader on communications policy and regulation. Also, five members of FSF's distinguished Board of Academic Advisors – Michelle Connolly, Ellen Goodman, Daniel Lyons, Steven Wildman, and Christopher Yoo – will offer their thoughts about the next five years, and probably the next five weeks as well.

I am very excited to hear what they all have to say, and I hope you are as well. If you haven't already registered, you may still do so by rsvp-ing to Kathee Baker at: Space is limited, however, so please don't come without registering first.

is at 10:45 AM.