Tuesday, September 22, 2009

In Dynamic Markets, Potential Competition Matters

Yesterday, FSF President Randolph May and I submitted comments to the FCC in an important forbearance remand proceeding. At stake in the proceeding is the importance of the potential for competition by new entrants in the broadband marketplace when the FCC conducts regulatory forbearance analysis. The FCC has questioned whether or to what extent it should consider potential competition when it weighs petitions for forbearance from regulation. As our comments relate, it is crucial for the FCC to adhere to those precedents in which it has considered both existing and potential competition in the telecommunications marketplace.

FSF advisory board scholars Dr. Dennis L. Weisman and Prof. Glen O. Robinson have aptly described telecommunications as a dynamic industry characterized by rapid innovation and competition, not stasis. The FCC has similarly recognized this dynamism, as we point out in our comments. Unfortunately, the FCC failed to take this dynamic market seriously when it rejected both Verizon's and Qwest's respective forbearance petitions from certain unbundled network element (UNE) regulations.

As explained in the FSF Perspectives piece, "Assessing the FCC’s Competition-Assessing Competence," the D.C. Circuit recently held that the FCC failed to consider the marketplace impact of potential competition in rejecting Verizon's forbearance petition. The D.C. Circuit remanded the case for the FCC to give a reasoned explanation of its decision. It also remanded Qwest’s forbearance case because the FCC had similarly rejected Qwest's forbearance petition without properly considering potential competition. At stake in the remand proceeding is the fate of both forbearance petitions, and (possibly) the continuing role of potential competition in the FCC's forbearance analysis.

Forbearance is an important deregulatory tool that Congress intended the Commission use to keep the fast-evolving telecommunications marketplace free from outdated and burdensome regulations. (For more on that, see the FSF Perspectives piece, "Why Forbearance History Matters.") It's especially important for the FCC to exercise its forbearance powers with respect to a dynamic market, and consideration of potential competition by new entrants or existing rivals is a crucial element in any dynamic market.

The FCC's own precedent concerning UNE regulations includes careful consideration of potential competition as an important force for ensuring improved price and service options for consumers. Our comments to the FCC emphasized that the Commission, especially in such a dynamic market as communications, should carefully examine potential competition and take it into account when conducting a forbearance analysis.