Tuesday, April 17, 2012

Forbearing From Forbearance

The FCC has a disappointing track record when it comes to exercising its statutory forbearance authority. Indeed, you might say the Commission has an unfortunate record of forbearing from forbearance.
This is a shame, and the Commission should change its ways. It has an opportunity to at least begin to do so by acting promptly on the pending forbearance petition filed by the United States Telecom Association.
"Forbearance" refers to Congress's direction to the FCC in the Telecommunications Act of 1996 to "forbear" from applying any FCC regulation or provision of the Communications Act applicable to telecom carriers if certain conditions are met. The Commission must forbear if it determines enforcement of such regulation is not necessary (1) to ensure the carrier's rates and practices are reasonable and nondiscriminatory; (2) to protect consumers; and (3) to uphold the public interest.
Congress stated right in the preamble of the 1996 Telecom Act that it intended for the FCC to "promote competition and reduce regulation." And, in the principal legislative report accompanying the 1996 Act, Congress stated its intent "to provide for a pro-competitive, de-regulatory national policy framework."
Thus, there is no mistaking Congress intended the 1996 Act to have a deregulatory thrust. With unassailable logic, Congress concluded the development of more competition and more consumer choice should lead to reduced regulation.
And there is little doubt forbearance was intended by Congress to be used as a deregulatory tool. The forbearance provision is unique. I am not aware of any provision like it in another regulatory statute. And forbearance is mandatory, not discretionary. The FCC statute says the FCC "shall forbear" if the specified criteria are met.
As further indication of Congress's deregulatory intent, the act states that a forbearance petition "shall be deemed granted" if the FCC does not deny it within one year. In other words, the default for agency inaction is forbearance from regulation, not continued regulation.
In light of the Commission's disappointing record of failing to grant forbearance petitions, about a year ago I offered what I characterized as a "modest proposal" urging Congress to amend the statutory forbearance provision to include an evidentiary presumption to the effect that, absent clear and convincing evidence to the contrary, the consumer protection and public interest criteria have been met. In effect, this presumption would shift the burden of proof to proponents of retaining regulations. The rationale and details of the reform proposal are set forth in these three pieces: (1) "A Modest Proposal for FCC Regulatory Reform," (2) "Rolling Back Regulation at the FCC," and (3) "Rolling Back Regulation at the FCC – Part II." (Note that under my proposal forbearance relief would be available to all entities subject to the FCC's regulatory jurisdiction, not just to telecommunications carriers.)
I would still like to see Congress revise the forbearance provision along the lines I have suggested. But, that said, under the terms of the existing statute, it is wrong for the Commission to continue generally denying otherwise meritorious forbearance petitions. In several pieces, my colleague, Seth Cooper, has explained how the Commission has erected inappropriately high barriers to the grant of forbearance petitions. In important cases, the agency wrongly has refused to credit wireless as a competitive alternative to landline service and consciously employed a static market analysis that totally discounts potential competition and other dynamic market impacts. For one example of Seth's work critiquing the agency's approach, see his "Forbearance Follies."
Now comes US Telecom with a forbearance petition that offers the Commission the opportunity to act consistently with Congress's intent that forbearance be employed as a deregulatory tool. The US Telecom petition identifies a number of outdated legacy regulations that clearly are no longer needed to protect consumers or the public interest in today's marketplace environment. Indeed, most no longer serve any purpose at all. And almost all were adopted long ago in a monopolistic analog narrowband environment that bears little or no resemblance to today's competitive digital broadband marketplace.
Examples of such legacy regulations identified by US Telecom include service discontinuance rules, network change approval requirements, accounting and cost assignment regulations, open network architecture mandates, various reporting obligations, and the like.
In the language of the old Title II common carrier regulatory regime that spawned them, these regulations are no longer "used or useful." Like facilities deemed no longer "used or useful," which in the days of old were excised from the rate base, the now no longer "used or useful" legacy regulations should be excised from the FCC's rule books.
There is a fairly broad, but not unanimous, consensus among commenters that many of the regulations identified by US Telecom should be jettisoned. Truth be told, the relief sought in the US Telecom petition is, for the most part, indisputably modest.
The US Telecom forbearance petition presents the FCC with the opportunity to demonstrate a seriousness of purpose, heretofore largely lacking, concerning Chairman Genachowski's pledge to eliminate unnecessary, outdated regulations that impose costs that exceed their benefits. The FCC should avail itself of the opportunity presented. And it should do so in a timely fashion.
Looking ahead in December 2000 to the then already rapidly emerging Internet age, former FCC Chairman Michael Powell, in his landmark address, "The Great Digital Broadband Migration," put the matter especially well:
"Our bureaucratic process is too slow to respond to the challenges of Internet time. One way to do so is to clear away the regulatory underbrush to bring greater certainty and regulatory simplicity to the market."
Right on. It's past time to stop forbearing from forbearance.