Sunday, August 15, 2010

Outside the Beltway Disconnect on Communications Policy

A week of traveling, first to San Francisco and then to Seattle, left me with the distinct impression, with respect to communications policy, that there is a fundamental disconnect between the policies the Obama Administration's FCC is pursuing and those that citizens living outside the Beltway would wish to have pursued. This disconnect is not unlike the gulf that appears to exist between the Obama Administration and the American public on other issues, say, health care reform.

In talking policy and politics with colleagues, friends, and family - and more than a few random acquaintances – it seems to me that, of all the issues on people's minds, "Net Neutrality" is pretty far down on the list. I am not suggesting my conversations and observations by any means represent a scientific poll. But I am suggesting that, even in the liberal redoubts of San Francisco and Seattle, the issues foremost on voters' minds revolve around the economy and jobs.

James Carville's famous injunction – "It’s the economy, stupid!" – has more relevance today than it did in 1992. If you want to discuss net neutrality, you generally have to bring up the topic yourself.

That being so, it remains a mystery, and well-nigh a tragedy, that the Obama Administration's FCC, under the leadership of Chairman Julius Genachowski, has devoted so much of its time and energy to trying to implement net neutrality mandates that will turn Internet providers into traditional common carriers. The effect of such new regulatory mandates will be, to some greater or lesser degree that defies precise advance calculation, an inhibition on the willingness of Internet providers to invest and to innovate – and, thereby, to create jobs. One recent study, by the Advanced Communications Law & Policy Institute at New York Law School, estimates that, if the FCC imposes net neutrality common carrier mandates on Internet providers, the U.S. economy will suffer a $310 billion economic loss in Gross Domestic Product over five years, along with a loss of 502,000 jobs. This is the study's most conservative scenario for adverse GDP impact and job loss.

With the stakes so high for the nation's economy and for jobs, the FCC Democratic majority's single-minded focus on imposing net neutrality regulation is more than a bit puzzling.

There are many instances one could cite as further evidence of the disconnect between the FCC and the American people. But after a week outside the Beltway one in particular sticks in my mind. Recall the way the FCC tried to spin the results of its own survey that it bills as part of its "broadband speed initiative." In a news release, the Commission trumpeted that the survey indicated 80% of broadband users do not know the speed of their Internet connection. Buried at the very end of the FCC's news release was this: "Fully 91 percent of broadband users say they are 'very' or 'somewhat' satisfied with the speed they get at home. The comparable number for mobile broadband, which is not yet technologically capable of the same speeds as home broadband, is 71 percent satisfaction."

Only an FCC bent on a mission of adopting new Internet regulations – even absent evidence of market failure or consumer harm - would choose to downplay the high level of consumer satisfaction with broadband service. It is obvious by the way the FCC spun the survey results that Chairman Genachowski must have been disappointed to learn the vast majority of consumers are satisfied with the speed of their Internet connections. This refusal to credit the positive, while emphasizing the negative, simply is further evidence of the disconnect between the FCC and the public at large. Most Americans know, intuitively, and without the benefit of an FCC survey, that the nation has made tremendous progress since the FCC decided in 2002 that broadband Internet providers should not be subject to common carrier-like regulation.

More evidence of the inside-outside the Beltway disconnect is provided by the fact that close to 300 members of the U.S. House of Representatives and Senate, including a large number of Democrats, have openly opposed Chairman Genachowski's latest net neutrality proposal. Presumably, these representatives have a better sense, especially in an election year, of what the public thinks the FCC should be doing than do the unelected commissioners.

Now back to the Left Coast, from whence I just departed. Communications Daily reports [August 16 edition; subscription required] about 100 persons showed up for a rally at Google headquarters to protest the company's net neutrality agreement with Verizon., Free Press, Public Knowledge, and their allies maintain that Google has sold out on its commitment to seeing strong net neutrality mandates put in place. Apart from the merits of the Google-Verizon agreement, the small size of the California turnout ought to give pause to those at the FCC, and elsewhere in Washington, who may have convinced themselves there is a groundswell of support among the American body politic for imposing new Internet regulations.

I said early on that it is not only a mystery, but also a tragedy, that the Obama Administration's FCC has chosen to go to such great lengths to impose net neutrality mandates, given the lack of evidence of market failure and given the widespread satisfaction of American consumers with their broadband Internet service. I may never understand this mystery. But I do understand the tragedy.

The tragedy is that the FCC's single-minded pursuit of net neutrality regulation necessarily has diverted attention and resources away from addressing other significant issues which, if done right, could have a positive impact on the economy and jobs. I have in mind, for example, reform of the antiquated and economically inefficient "universal service" telephone regime that now levies a surcharge of nearly 14% on all long distance calls. A "telephone tax" of this size, necessitated by the payment of subsidies to inefficient carriers using high-cost legacy technologies, as well as to multiple providers serving the same geographic area, obviously has a suppressive effect on economically efficient activity. The universal service regime should have been reformed long ago, and this should be a top priority of the Commission.

Another priority should be spectrum reform. The Genachowski FCC, to its credit, has emphasized the economic benefits to be realized from more efficient spectrum utilization, especially a "repurposing" of spectrum so that wireless providers are able to meet surging consumer demand for new, innovative next generation wireless broadband services. The attention in the National Broadband Plan devoted to this subject was noteworthy, and particularly welcome. But implementing reform of spectrum policy, in conjunction with Congress, is a major undertaking, one again requiring substantial Commission attention and resources.

Perhaps the Commission's traditional August "recess" will provide time for some much-needed reflection and reevaluation. There would be no shame at all if Chairman Genachowski decided, especially in light of the D.C. Circuit's recent Comcast decision holding the FCC lacks authority to regulate Comcast's broadband network management practices, the agency should abandon its efforts to impose net neutrality regulation. There would be no shame, and indeed much credit, in acknowledging, in light of the serious questions concerning the FCC's legal authority to act on its own, that the agency should leave the matter of regulation of Internet providers to Congress.

If the FCC took this course, the agency could turn its full attention to the more urgent matters at hand, matters that, unlike net neutrality with its likely negative impact on the nation's economy and jobs, would most likely have positive economic consequences.

If the FCC did this, with talk still prevalent of a potential "double-dip" recession, the agency would reduce, or even eliminate, the disconnect that presently exists between it and the American public regarding the policies and priorities it is pursuing.