Wednesday, April 17, 2013

Don't Forbear Any Longer From Forbearance Reform!

There is a growing consensus that a new Digital Age Communications Act is needed that reflects the technologically dynamic, increasingly competitive digital age communications marketplace. The current "smokestack" regime, grounded in outdated techno-functional constructs that apply differential regulatory burdens to comparable competitive services, needs to go.   
But it is also pretty clear that it may be some time before the growing consensus leads to adoption of the necessary radical overhaul of the current law. 
In the meantime, Congress could simply modify one provision of the current law to require the Federal Communications Commission to act in a less regulatory fashion than the agency generally does now. 
Two years ago this month I published a Free State Foundation Perspectives entitled, "A Modest Proposal for FCC Regulatory Reform: Making Forbearance and Regulatory Review Decisions More Deregulatory." There I suggested that Congress amend the Communications Act's forbearance provision to make forbearance relief the viable deregulatory tool Congress intended when the Telecommunications Act of 1996 added the provision to the law. 
Section 10, the "forbearance provision," mandates that the Commission "shall forbear" from applying any regulation or statutory provision if the agency determines enforcement of such requirement "is not necessary" to ensure that a telecommunications carrier's charges and practices are reasonable and "not necessary for the protection of consumers," and that forbearance is consistent with the public interest. 
This provision is unique among regulatory statues, and Congress obviously intended the FCC to use it as a deregulatory tool. For example, under the provision, if the Commission does not deny a forbearance petition within the requisite statutory period, it is "deemed granted." In other words, by its terms, the statute evidences a deregulatory intention. 
As we have detailed over the years at the Free State Foundation, the FCC has employed its forbearance authority too sparingly, often refusing to acknowledge new realities that, in effect, mean consumers can be protected more effectively by the competitive marketplace than by outdated legacy regulations. For example, as my colleague Seth Cooper has demonstrated in "Forbearance Follies" and elsewhere, in denying several petitions for forbearance relief the agency simply dismissed wireless service as a competitive alternative to wireline service. The Commission acted this way despite the fact that over 30% of U.S. households have discontinued their wireline service. 
As I suggested in April 2011, to redress the FCC's reluctance to grant warranted regulatory relief, a sentence could be added at the end of Section 10(a) to the effect that: "In making the foregoing determinations, absent clear and convincing evidence to the contrary, the Commission shall presume that enforcement of such regulation or provision is not necessary to ensure that a telecommunications carrier's charges or practices are not unreasonable or unreasonably discriminatory or necessary for the protection of consumers and is consistent with the public interest." 
I explained in the "Modest Proposal" essay that establishing such an deregulatory evidentiary presumption in Section 10 "would not dictate the outcome of the Commission's assessment of any particular forbearance petition." That is not the intent. 
"But the presumption would require the Commission to grant regulatory relief absent the presentation of convincing evidence to the effect that the requisite consumer protection and public interest showings have not been made. This should make it more difficult, for example, for the Commission to ignore or minimize the significance of evidence of wireless substitution for wireline in performing a competition analysis." 
I made in clear in a blog posted in May 20111 that the amended forbearance provision incorporating the deregulatory evidentiary presumption should apply not only to telecom carriers, as is presently the case, but as well to cable operators and other entities regulated by the Commission. There is no reason that any entity subject to a Commission regulatory mandate should not be eligible to seek relief. 
It is a hopeful sign that there is increasing support for reform of the forbearance process as a means of granting regulatory relief when justified by competitive marketplace realities. In his superb keynote address at FSF's March 21 Fifth Annual Telecom Policy Conference, I was especially gratified that Senator Marco Rubio declared that the forbearance process should be reformed "so it is more difficult for the FCC to reject regulatory relief petitions when they are justified." This is exactly right. 
And, along the same lines, in his Conversation with me, Commissioner Pai stated that there is "no question the telecommunication marketplace in particular has undergone revolutionary change" and that it "is much more competitive than it has ever been." He agreed that my forbearance proposal was "interesting" because the Commission should be "more liberal in its application of forbearance authority." 
Immediately below, and also here, are links to the videos of Senator Rubio's keynote and the Conversation with Commissioner Pai. Of course, in addition to the remarks relating to forbearance, there is much more of value for those of a reform-minded bent. 
But, today, I am focusing on reforming the Communications Act's forbearance provision by inclusion of a deregulatory evidentiary presumption along the lines I have suggested in my proposal. 
Pending a much-needed wholesale overhaul of the Communications Act, reforming the forbearance process offers an interim avenue for spurring the FCC, more regularly, to grant justified regulatory relief that comports with the competitive realities of today's digital marketplace environment. 
I hope some reform-minded Senator or Representative – or a whole group of them – will pick up the reform cudgel and lead the effort.