The D.C. Circuit rendered a little-noticed but nevertheless important decision regarding the regulation of incumbent telephone companies' special access broadband services on July 17 in Ad Hoc Telecommunications Users Committee v. FCC. In a unanimous opinion written by Judge Brett Kavanaugh, the Court affirmed an FCC order that, through forbearance, largely eliminated dominant carrier pricing regulation of certain of AT&T's – as well as two smaller telephone companies' – special access broadband services. As the Court noted, the FCC had not eliminated the basic common carrier requirements that the telcos' special access rates be reasonable and nondiscriminatory, but rather the dominant carrier regulation that required rate caps and tariff filing.
In the course of affirming the FCC's decision in a concise opinion, Judge Kavanaugh made several points well worthy of note.
First, he observed that "[b]roadband services do not correspond to the old telephone-cable regulatory divide" and that both Congress and the FCC have recognized that "regulation of broadband can pose different issues and challenges than regulation of local telephony."
Second, he pointed out that, "given the rapidly changing state of the overall broadband market and §706's direction that the FCC may look to and attempt to shape possible future developments in regulating broadband," the recent D.C. Circuit Earthlink decision had stated "that the law does not compel a 'particular mode of market analysis or level of geographic rigor' when the agency forbears from imposing certain requirements on broadband providers."
Third, he referred to the FCC's recognition that the often significant costs of replicating the incumbents' special access facilities could be justified, and were already being justified, by several competitive providers "by the sizable revenues that could be obtained."
Finally, and most importantly for present purposes, was this statement: "Perhaps an obvious point, but a decision that gives owners of telecommunications lines more control over access to those lines tends to increase the incentive for competitors to build competing lines."
I have been saying for a very long time that, in light of the current state of market development and technological advances, special access regulation has the perverse effect of inhibiting the development of further competition that those complaining about special access say they want. (For one example of my pieces from 2007, see here.) This point, although obvious to Judge Kavanaugh, is none too obvious to many.
Judge Kavanaugh's statement may not persuade those who reflexively insist we should regulate broadband in the same public utility-like manner local telephony was regulated in the last century. But the clarity with which he stated an "obvious point" – that the way to increase competition in a changing marketplace is generally not through more regulation -- may help persuade those with open minds.
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