Monday, October 15, 2012

Changing the FCC's Analog-Era Mindset

There is almost certainly not a marketplace in the United States today that is as dynamic and rapidly evolving as the communications and information services sector. The reason for this, of course, is that the transition from narrowband to broadband services, from analog to digital technologies, and from monopolistic to competitive market structures, has been well underway for over a decade now.
Despite the FCC's recently acquired reticence to pronounce various market segments "competitive," the evidence nevertheless is strong that the broadband, wireless, and video markets are effectively competitive. It appears the agency's newfound reticence has more to do with wanting to justify the preservation of its regulatory domain than with performing fact-driven competitive market evaluations.
And, make no mistake, the FCC's specific regulatory actions – indeed its overall regulatory posture – matters. No doubt consumers should be protected from abusive practices in the face of demonstrable market failure. But absent market failure, marketplace competition will protect consumers better than the FCC's brand of regulation, which very often is unnecessarily broad, overly anticipatory in reach, and unduly rigid in application.
Stated simply, when the FCC over-regulates and unnecessarily intervenes in the marketplace, investment and innovation are dampened, market structures and business models are frozen in place, competitive entry is discouraged – all with the effect of impeding the completion of the transition to all-IP networks for all.
This is not to say that the Commission, even in recent years, has not taken some welcome deregulatory steps, such as beginning to implement meaningful Universal Service Reform, allowing the partial expiration of the ban on exclusive contracts for satellite programming between any cable operator and any cable-affiliated programming vendor in areas served by a cable operator, or forbearing from enforcing the prohibition on mergers between cable operators and competitive local exchange carriers.
When the Commission has taken such market-oriented actions, I have been happy to applaud them and give the agency, and Chairman Genachowski, due credit. But the reality is that they have been the exception and not the norm.
The norm has been too much regulation in an era of ever increasing competition. The adoption of new Internet regulation in the form of net neutrality mandates is but one example, albeit an important one. Another example is the deleterious practice of routinely engaging in "regulation-by-condition" in the context of reviewing proposed mergers.
To some (lesser) extent, and at some (slower) pace, the digital revolution likely will continue to bring more competition, more consumer choice, and more innovative products at lower prices, even in the face of Commission over-regulation. But surely the extent and the pace of the revolution matters. More investment and innovation, more competition and consumer choice – all more quickly – is better for consumers and for the country.
Here's the crux of the matter. The FCC largely still operates as if it is in the grip of an analog-era regulatory mindset in which the default presumption is the existence of static, monopolistic markets. This analog-era mindset has an air of unreality about it.
Regardless of who wins the coming election, this mindset should change in 2013. A digital-era mindset would find ways to account for a presumption of dynamic, competitive markets. (No reason why it can't change in the last months of 2012, of course.)
To that end, I hope you'll be able to join us for this Thursday's (October 18) Free State Foundation luncheon event at the National Press Club that begins at 11:45 AM. The program is entitled, "Ideas for Communications Law and Policy Reform in 2013." FCC Commissioner Robert McDowell and I will lead off the session with what I'm sure will be a lively, thought-provoking conversation. This will be followed by a free-wheeling panel discussion by four of the nation's leading experts on communications law and policy. Details concerning the program and a registration link are in the sidebar to the right, and you must register to attend because space is limited.
At the forum, we'll discuss both process and substance reforms. Regarding the latter, we will address topics such as reforming the forbearance relief process and the way the agency performs competitive assessments, reforming the transaction review process, revising spectrum policy to relieve the spectrum crunch, completing USF reform, and more. Of course, with a growing sense that the Communications Act needs to be substantially revised, we'll discuss policy reforms that can only be accomplished by Congress.
Please tweet your ideas at: fsfOct18ideasforum. And keep the discussion going on Twitter during and after the event.
Finally, I'll have more to say about this in the near future, but you will be the first to know! The Free State Foundation's latest book, "Communications Law and Policy in the Digital Age: The Next Five Years," will be in print and available in a week. In the book, some of the nation’s most eminent scholars explain why communications law and policy should be changed in response to the profound marketplace transitions taking place. And, as importantly, the contributors explain how law and policy should be changed. In addition to myself, the contributors, all recognized experts on the subjects they address, are: Representative Marsha Blackburn, Michelle Connolly, Seth Cooper, Ellen Goodman, Daniel Lyons, Bruce Owen, James Speta, and Christopher Yoo.
While the book is available on Amazon, Barnes & Noble, and at other outlets, Carolina Academic Press, the book's esteemed publisher, is now offering a 20% discount for orders using the special discount code on this CAP promotional flyer.