Monday, February 01, 2010

FCC Commissioner Robert McDowell: "First Do No Harm"

At last Friday's Free State Foundation's Annual Winter Telecom Policy Conference, FCC Commissioner Robert McDowell gave a stirring keynote address that made the case for what, for some time, I have been calling regulatory modesty. Focusing on the FCC's upcoming national broadband plan and the agency's proposed net neutrality regulations, the title of Commissioner McDowell's address – "The Best Broadband Plan for America: First Do No Harm" – captures the essence of the approach that should guide the Commission.

With the date for adoption of the broadband plan drawing close, and proposed net neutrality regulations already on the table, there is a serious risk that this new Commission will go far off-course. Unless the agency demonstrates that it understands the high costs imposed by public utility-style regulation of broadband Internet services and that it appreciates the benefits consumers have realized from the existing generally deregulatory broadband environment, it will do so. It needs to exhibit a very healthy dose of regulatory modesty.

I will continue to have much more to say about these broadband matters in the coming weeks and months. It is unlikely, though, that you will find a more persuasive case for the exercise of the Hippocratic injunction – "First, Do No Harm" – than that set forth in Commissioner McDowell's keynote address. The entire address bears a close reading. But for those unable to do so at this time, here are some of the key excerpts:


"And keeping in the hands of consumers that power to choose among products and services in a fast-changing and competitive free market should be the FCC's prime directive when it comes to crafting our National Broadband Plan and examining proposed rules governing Internet management. The Commission's No. 1 goal should be to do no harm.
But first we must ask: How have we met with such success in the first place? With calls for more regulation, some are bending the light of history through a revisionist lens. Keep in mind that innovation and investment in broadband did not come about due to a government mandate. In fact, for over three decades now, it has been the bipartisan policy of the U.S. Government to keep information services lightly regulated. The innovation that consumers are enjoying today came about under a minimalist regulatory framework."

"While the FCC continued on the logical path of classifying broadband services as less regulated information services under Title I in 2002, 2005, 2006 and 2007, investment, innovation, competition and consumer choice were growing.
Let's allow the facts to speak for themselves. According to a Pew Internet & American Life Project study, in 2003 only about 15 percent of American adults had access to broadband at home.
Today that number is closer to two-thirds. Some form of wireline-based broadband is available to roughly 95 percent of Americans.
Cable broadband alone is available to 92 percent of the country. Once deployment of DOCSIS 3.0 is complete, those consumers could enjoy speeds of up to 100 mbps. That means 92 percent of the country could have access to far faster broadband services merely through an upgrade. This incredibly positive fact is overlooked too frequently in the debate over America's broadband future.

"In addition to acknowledging the fatter and faster pipes being delivered to consumers through coax and fiber, we should not forget the tremendous explosion of wireless broadband. In fact, wireless is the fastest growing sector of the broadband market. Wireless broadband was rarely mentioned in 2003, but by December of 2005, there were already 3.3 million wireless broadband subscribers. And, last November, that number had grown to 99.7 million wireless broadband subscribers. It should go without saying that as more and more spectrum bands are built out – for example, BRS/EBS, AWS-1 and 700 MHz – this trend will continue. But today, over 50 percent of American consumers have a choice of five wireless carriers, with 94 percent having a choice of four carriers."

"Investment, innovation, deployment and adoption have all been growing rapidly in the stability of the current regulatory environment. These are positive trends that should be nurtured and strengthened. As the FCC goes forward it should, at the very least, be careful to do no harm."

"[S]hadowing the Broadband Plan is the FCC's Open Internet proceeding. It proposes to dramatically change the existing regulatory environment for broadband – the same environment that has allowed for the development of the robust and dynamic market I have just described. Before embarking on any regulatory journey, it is pragmatic for the government to ask, 'What exactly is broken that only the government can fix?'"

"Both NTIA and the Department of Justice (DOJ) filed comments in our proceeding. Not surprisingly, neither provided evidence of a failed Internet marketplace. In fact, DOJ's comments were downright optimistic about the competitive and dynamic future of the broadband market."

"First, modern day "information services" have never been regulated as common carriage. Second, starting with cable modem services in 2002, the Commission examined the early 21st Century broadband market and determined that it was far different from the early 20th Century "plain old telephone service" market that inspired the 1934 Act. As the result of these significant differences, the Commission determined that broadband should be classified as less regulated information services under Title I.
Don't forget that the aim of the 1996 Act was to deregulate this space as competition grew, and the broadband classification orders were drafted with such Congressional intent in mind."

"But let's ask a bigger question: Exactly what kind of companies might get tangled up into this regulatory Rubik's Cube? Any Internet company that offers a voice
application? What about an app developer that makes an app closely "ancillary" to a voice application? With this newfound authority, why stop at voice apps? Isn't voice just another type of data app?
As the distinction between network operators and application providers continues to blur at an eye-popping rate, how will the government be able to keep up?"

"And these Commission actions would not create extreme litigation risk and regulatory uncertainty? Would this new regime create the environment needed to attract up to $350 billion in private risk capital to build out America's broadband infrastructure, as the Commission analysts drafting the National Broadband Plan have estimated?"

"Some who advocate for new rules are also arguing against pricing freedom. They should be careful what they wish for. Direct or indirect economic regulation of Internet access could very well increase prices for all consumers. Under a new nondiscrimination construct, if every consumer is to be treated the same regardless of usage, then all prices must rise to compensate for the costs imposed by heavy users. This is especially true for shared networks such as wireless and cable where consumers share bandwidth with their neighbors, whether they know it or not. In short, under one scenario, the majority of broadband consumers would pay a higher rate to compensate for a minority of users who consume more bandwidth."

"One can't speak at a Free State Foundation event without mentioning the Constitution. I'll start with the First Amendment, because it's first. The Supreme Court just reaffirmed last week in its Citizens United decision that corporations have a protected right to speak under the First Amendment.
Additionally, the Commission bears the burden of justifying any speech regulation it imposes on corporate entities, just as it does with individual citizens. Some commenters contend that new rules could impermissibly burden speech in several different ways, including by imposing capacity restraints on network providers' own services in order to accommodate the speech of others. Others contend that the act of routing data is conduct and not speech.
Nonetheless, if new rules are enacted, the courts are sure to be presented with a First Amendment challenge during the inevitable appeals. The level of constitutional scrutiny applicable to a net neutrality "nondiscrimination" mandate is a key question to be resolved…. In short, under any standard, court precedent requires the Commission to conduct a serious analysis proving that the harm is real before the agency adopts rules that restrict speech. Thus far, the record in this proceeding does not meet that burden of proof."

"I truly hope that the Commission will seriously consider a different course – a course that does not carry with it the unforeseen liabilities that new regulations are sure to bring. It is my hope that we all could agree on a middle ground idea, such as this one. In lieu of new rules, which will be tied up in court for years anyway, the FCC could forge a new partnership with the appropriate non-governmental collaborative Internet governance bodies that have worked flawlessly on these issues for years. Working together, we could collectively shine a bright light on allegations of anticompetitive conduct and work directly with the established Internet governance community to resolve controversies. This approach, coupled with strict enforcement of our antitrust laws, could very well provide the benefits sought by proponents of new rules without incurring the unexpected costs of a new regulatory regime. After all, this way of doing business has worked quite well thus far."