Monday, October 30, 2006

Microsoft Softens on Net Neutrality

As a company with a touch of market power itself, perhaps Microsoft has a special sensitivity to the potential for abuse of the FCC's merger review process as a means of singling out specific companies for more onerous regulatory treatment than accorded other similarly-situated companies. In any event, for whatever reason, according to the Broadcasting and Cable report, MS has issued the following statement: "Microsoft has withdrawn its name from It's Our Net website for the pendency of the AT&T-BellSouth merger proceeding based on a company decision not to engage in the proceeding." The company added: "[W]e continue to support and will pursue other opportunities to obtain meaningful Network Neutrality policies."

The world would be a better place--or, more modestly, at least communications policy would be in a better place--if MS would grab the whole ball of wax and rethink its support of net neutrality mandates. Nevertheless, it is heartening to see the company apparently recognize the unsoundness of using the merger review process to impose conditions--such as the so-called Fifth NN principle--that would uniquely burden only the merger applicants and not other industry participants. The proposed condition pushed by the remainder of the MS's "It's Our Net" cohorts would essentially reimpose public utility-style common carrier regulation on AT&T's and BellSouth's broadband services. In my view, that would be a terribly backward and counterproductive step to take in today's competitive environment if applied to all broadband providers in the context of a generic rulemaking proceeding. But it would be especially egregious for the FCC to contemplate taking such a radical regulatory action in the context of a merger proceeding that singles out specific companies to bear significant regulatory burdens not shared by competitors. In that case, uniquely inequitable treatment would compound singularly unsound policy. I've written about the abuse of "regulation by condition" many times. Here's a recent one.

We don't know exactly why Microsoft decided not to participate in the merger proceeding. But taking the liberty of presuming that it shares some of my qualms about the use and abuse of the FCC's merger review process, it deserves some credit. Maybe it can use its "withdrawal period" to reconsider it general support for net neutrality regulation.