Thursday, June 30, 2011

Independence Day 2011

On March 22, 1775, in his speech to Parliament "on conciliation with the colonies," Edmund Burke declared: "In this character of the Americans, a love of freedom is the predominating feature which marks and distinguishes the whole….This fierce spirit of liberty is stronger in the English colonies probably than in any other people of the earth."

"A love of freedom is the predominating feature..."

The following year – 1776 -- Thomas Jefferson wrote one of the most famous sentences in history: "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness."

In penning that sentence in the Declaration of Independence, and referring to "unalienable Rights," Jefferson invoked the natural law tradition which was so influential among many of the Founders. In the face of the impending conflict with England, it is not surprising he would do so. Because in contrast to the natural law position stood the view that acts of Parliament – think the various statutes imposing taxes on the colonies --- were supreme and absolutely binding as law. If this absolutist view of legislative supremacy were accepted, then America's act of declaring independence in order to secure inalienable rights would be essentially lawless.

Of course, Jefferson and his revolutionary compatriots, steeped as they were in English law, had good authority for their natural law view – from Magna Carta, through Bracton and Sir Edward Coke, to Sir William Blackstone. In the decade preceding the Declaration of Independence, some 2500 copies of Blackstone's Commentaries on the Law were purchased in the American colonies. And in the Commentaries, published in four volumes from 1765-1769, Blackstone had said this: "For the principal aim of society is to protect individuals in their enjoyment of those absolute rights, which were vested in them by the immutable laws of nature; but which could not be preserved in peace without that mutual assistance and intercourse, which is gained by the institution of friendly and social communities."

Certainly, when Jefferson, in the Declaration, invoked "the Laws of Nature and of Nature's God" as a source for "unalienable Rights," he knew he was invoking the weight of Blackstone, Coke, and the Magna Carta.

Ever since the Constitution's ratification in 1789, there has been a lively debate concerning whether the Declaration of Independence's principles have any continuing legal import or significance, or whether the Constitution alone now constitutes our fundamental law. If you are getting ready to head off to a Fourth of July picnic or down to the local pool, you'll be relieved to know I am not going to begin a discourse on that subject here. (Maybe next year!)

For my present purposes, it is enough to know the Declaration of Independence is included at the head of the United States Code under the heading of "Organic Laws of the United States of America." And to know Abraham Lincoln's response to Stephen Douglas in 1858 in one of their famous debates: "If the Declaration is not the truth, let us get the statute book, in which we find it, and tear it out!"

No doubt in many ways this Fourth of July holiday carries somber overtones, with very serious challenges confronting America at home and abroad. It would be easy to be pessimistic about America's future. But I think – at least hope desperately -- it would be wrong. For whether or not the Declaration has any legal import is certainly not determinative concerning whether it continues to embody the most fundamental American principles which define us as a nation. And whether its spirit continues to animate us.

With Lincoln, I would say this: If the Declaration is not the truth, then tear it out of the statute book.

With Burke, I would say this: In this character of the Americans, a love of freedom is the predominating feature which marks and distinguishes the whole.

In a letter to Edward Rutledge in 1788, Jefferson wrote: "My confidence is that there will for a long time be virtue and good sense enough in our countrymen to correct abuses."

It is far too easy to take for granted what we have in this country, and too many of us do. But as long as Americans' love of freedom remains strong, I remain optimistic that, for a long time to come, there will be virtue and good sense enough to sustain our ability to maintain our liberties and our prosperity.


On that hopeful note, I wish you a most happy Independence Day. And, as always, all of us at the Free State Foundation are grateful for your support for the work we do promoting free market, limited government, and rule of law principles. Most of all, we are grateful for your friendship.

PS – Here are previous Independence Day blogs: 2010, 2009, 2008, and 2007.

Wednesday, June 29, 2011

OECD: Formal Regulatory Regime Risks Undermining Growth

The paragraph below is excerpted from the just-released OECD document concerning principles for Internet policy-making.

It’s short and worth reading in its entirety. Note the OECD says the development of a formal regulatory regime “could risk undermining growth.”

Wouldn’t it be nice if the FCC regulators were as knowledgeable about the working of this “decentralised network of networks” – and as sensitive to the regulatory risks of straight-jacking this “continuously evolving interaction and independence among the Internet’s various technical components” – as are their European counterparts.

Time was when we were.

“Promote the open, distributed and interconnected nature of the Internet:

As a decentralised network of networks, the Internet has achieved global interconnection without the development of any international regulatory regime. The development of such a formal regulatory regime could risk undermining its growth. The Internet’s openness to new devices, applications and services has played an important role in its success in fostering innovation, creativity and economic growth. This openness stems from the continuously evolving interaction and independence among the Internet’s various technical components, enabling collaboration and innovation while continuing to operate independently from one another. This independence permits policy and regulatory changes in some components without requiring changes in others or impacting on innovation and collaboration. The Internet’s openness also stems from globally accepted, consensus driven technical standards that support global product markets and communications. The roles, openness, and competencies of the global multi-stakeholder institutions that govern standards for different layers of Internet components should be recognised and their contribution should be sought on the different technical elements of public policy objectives. Maintaining technology neutrality and appropriate quality for all Internet services is also important to ensure an open and dynamic Internet environment. Provision of open Internet access services is critical for the Internet economy.”

In Congress, More Spectrum and Less Regulation is Key to 4G

"Regulate first, ask questions later" makes for a backwards policymaking process. Unfortunately, legislation recently introduced in Congress adopts that backwards approach. The Next Generation Wireless Disclosure Act (H.R. 2281) would require the FCC to adopt new regulation of next-generation wireless network service disclosure practices…and then later conduct a study on network disclosure practices and performance in market. The bill would also call on the FCC to assume new responsibilities as a 4G wireless reliability ratings board.

H.R. 2281 would saddle advanced services with special regulatory burdens without having established any kind of actual problem that warrants specific new rules. There already are laws against unfair and deceptive trade practices. And the regulation called for by H.R. 2281 ignores the check provided by competition in the wireless market. Such regulation risks hampering rapidly evolving wireless networks that are only now beginning to reach 4G service levels.

And compelling wireless carriers to publish government-set reliability standards even poses First Amendment questions, since less intrusive alternatives are available to the FCC to address network reliability concerns. H.R. 2281 looks to tie down wireless networks with added regulatory burdens when Congress should instead be looking to free up more spectrum for commercial wireless use so that carriers can meet surging consumer demands and give them next generation services at faster speeds and with greater reliability.

According to the text of H.R. 2281, within 180 days of passage the FCC must adopt new rules requiring wireless providers of 4G services to disclose: (1) "guaranteed minimum transmit and receive data rates for Internet protocol packets to and from on-network hosts for the service, expressed in megabits per second"; (2) "[t]he reliability rating of the service" based on a standard method to be established by the Commission "which shall be based on the data session start success percentage (network accessibility) and the data session completion success percentage (network retainability) of the service"; (3) service price; (4) any additional charges not included in the service price; (5) detailed descriptions of its "network management policies of the service with respect to Internet protocol packets to and from on-network hosts"; (6) [t]he "technology used to provide the service" – whether it be LTE, WiMax or HSPA+; and (7) a website address containing terms of service and coverage areas. Also, wireless carriers would have to provide these disclosures prominently and frequently "in all marketing materials for such service, at the point of sale of such service, and (in the case of postpaid advanced wireless mobile broadband service) in all bills for such service" (emphasis added).

Apparently, the regulation called for in H.R. 2281 is motivated by concerns that wireless carriers are puffing up their services' data speeds and reliability beyond actual performance capabilities. Strangely, however, the bill directs the Commission to conduct a study of 4G wireless practices and performance within one year after the bill's passage. That is, the FCC would be required to complete its study within 185 days after it adopts rules governing the subject it's supposed to study. Here, apart from all other problems, H.R. 2281 surely takes a wrong-headed approach.

Obviously, it makes far more sense to first conduct a study of the subject under consideration before imposing regulation on the subject. Such a study could help provide a factual basis for deciding whether there is an actual problem in the market and for deciding whether new regulation specific to 4G wireless service is the best way to address any such problem.

The bill's findings provide no data-driven basis for concluding that a unique, 4G wireless service disclosure problem exists. After all, wireless carriers are only in the early stages of rolling out 4G services. So H.R. 2281 instead requires specific new regulation on a speculative, prophylactic basis.

Given the competitiveness of the wireless market there is good reason to question whether specific new regulation regarding next generation wireless network disclosure and performance is necessary or wise. According to the FCC's 2011 Wireless Competition Report, "[t]he percentage of the population covered by at least two mobile providers using 3G or 4G network technologies increased from 73 percent in May 2008 to nearly 92 percent in July 2010. In addition, the percentage of the population covered by three or more providers increased from 51 percent in May 2008 to 82 percent in July 2010." And "approximately 68 percent of the population is covered by at least four mobile broadband providers." (We will have more to say about the Report in a subsequent blog post.) Even assuming the AT&T/T-Mobile merger goes through, consumers in most parts of the country would continue to have choice of service from three national carriers – the merged AT&T/T-Mobile, Verizon and Sprint – plus at least one other carrier. Fourth carrier candidates include multi-metro regional providers such as MetroPCS, Leap (Cricket), and US Cellular, recent entrants such as Clearwire also providing choices to consumers; and any of the more than one hundred small, facilities-based regional providers operating in single geographic areas.

With that kind of marketplace competition, carelessness and dishonesty becomes risky business for wireless carriers. Those carriers that routinely overstate their network performance capabilities risk losing customers to their competitors. And those carriers offering realistic assessments of their network capabilities and providing reliable service are well-positioned to lure customers away from those who might be careless or dishonest. Choice and churn provide a check and a balance on the conduct of wireless carriers that should not be ignored.

Most consumers are probably not likely to closely track the data speeds and other performance characteristics of their purchased services with exacting precision. But it's certainly within the ken of most consumers to recognize when their service drops calls, allows for mobile web-surfing at a snail's pace, or takes too long to download files to their handsets. Dissatisfied consumers can change wireless carriers. And even without new regulation specific to next-generation wireless services, in particularly egregious circumstances consumers can still consider legal action.

Wireless carriers are already subject to general prohibitions on unfair and deceptive trade practices. If a wireless carrier were to push particularly egregious kinds of deception in its sales pitches, most consumers in most states could file consumer protection lawsuits. Generally, state consumer protection laws require plaintiffs to prove an unfair or deceptive act or practice affecting the public interest occurred within a trade or business causing the plaintiff an injury to his or her business or property.

H.R. 2881's requirement that the FCC come up with a next generation wireless network reliability ratings system and require wireless carriers to display FCC conclusions also raises concerns. As an institutional matter, there is good reason to be skeptical about government establishing ratings system for advanced information networks in dynamic markets. Even the FCC concedes this general point in its 2011 Wireless Competition Report, stating that "[t]he measurement and representation of the overall quality of a provider's network…present a number of challenges…there is neither a single definition of network quality nor a definitive method to measure it." Engineering and operating wireless networks involves a complex series of constraints that must be balanced by competing carriers, depending on the particular kinds of wireless technologies and devices they are supporting as well as spectrum propagation characteristics, geography, backhaul facilities usage, and data traffic volumes. Wireless networks undergo constant upgrades as new cell towers and are constructed and co-located, as new backhaul arrangements are made, as new devices are put to market, and as data traffic trends on the network change.

Those complexities also pose challenges to any practical implementation of government-set standards. There is the risk of creating a snapshot, partial picture of network reliability based on data session start and completion success percentages that may reflect the FCC's own judgment about reliability but that others may think leaves out other considerations. There is also the likelihood of government standards becoming a drag on wireless carriers that are constantly upgrading their networks. Reliability testing disclosure burdens may not take stock of the latest wireless network performance upgrades, aspects of particular network management such as data prioritization, or geographical factors.

Regulation requiring wireless carriers publish government-set standards also amounts to a compelled speech mandate that raises constitutional issues. Advertising that is inherently or implicitly misleading receives no First Amendment protection. But where no deception is involved, commercial speech regulation is subject to the test set out by the Supreme Court in Central Hudson Gas & Electric Company v. Public Utilities Commission of California (1985). Under Central Hudson, non-misleading commercial speech regulation is permissible where: (1) it advances a substantial government interest; (2) it directly advances that interest; and (3) it is not more extensive than necessary to achieve that interest. The government bears the burden in justifying its regulation to alleviate a real problem in a material way, as opposed to regulation with only a vicarious connection to a merely conjectured problem. And the government must demonstrate that less burdensome alternatives will not suffice to directly advance the substantial interest at stake.

Finally, it is important to consider H.R. 2881's proposal for next-generation wireless regulation in the context of wireless' recent regulatory history. Since 1993, wireless has flourished thanks in significant part to light-touch regulatory treatment. The absence of government intrusion has fostered approximately $285 billion in capital expenditures over the last dozen years, declining revenues per minute for voice and text messaging, and rapid innovation in new smartphone devices, applications, and services. But next generation wireless disclosure regulation now joins the pipeline of regulatory proposals that includes: early-termination fee regulation, handset exclusivity regulation, bill shock regulation, text messaging and common short code regulation, smartphone app regulation and smartphone manufacturing regulation (such as FM chipset mandates). Not to mention wireless network neutrality regulation that was adopted by the FCC in December.

Rather than risk harm to one of the most productive sectors of our economy with a regulatory pile-up, the Congress should instead focus its efforts to what will undoubtedly ensure faster and more reliable wireless service in the future: freeing up more spectrum. The best thing that Congress can do to ensure high speeds and reliability for wireless broadband is to promptly enact legislation giving the FCC authority to identify and auction additional spectrum for commercial use.

Right now, more spectrum, not more regulation, will benefit wireless consumers the most.

Sunday, June 19, 2011

The FCC's "Future of the Media" Report: More Madisonian Than Madison Avenue

When the FCC's "Future of the Media" project was announced, I expressed skepticism concerning the need for the FCC to embark on a wide-ranging study of the media. And I expressed concern that the study -- and what I supposed might be proposed recommendations for new regulations and government subsidies – would have serious First Amendment implications that would be minimized. Here is a snippet from what I wrote in an April 2010 blog a few weeks after the project's launch:

"You might think that in an age of media abundance the justification for government support of, and involvement with, the media would be reduced, not heightened. Certainly, this view would be more consistent with my understanding of First Amendment sensitivities. But, rather perversely, media abundance is viewed by some as a rationale justifying more government support and direction of public media."

I was invited to testify at one of the public hearings on "Public and Other Noncommercial Media in the Digital Age," and my April 30, 2010 testimony is here.

The FCC has now released its 450+ page study, prepared under the leadership and direction of Steven Waldman, its principal author, under the title, "The Information Needs of Communities." When I learned that the report was going to be released under this more academic-like title, rather than the more grandiose "Future of the Media" moniker, I suspected that perhaps Madison Avenue-types were laying the groundwork to downplay recommendations for far-reaching regulatory and government policy changes.

With the caveat that I only have had an opportunity to review the Executive Summary, which itself is 25 pages, and that I and other FSF scholars may have more to say in the future, I am pleased to acknowledge that the report appears to be much more Madisonian that Madison Avenue. Although I certainly don't agree with all the report's recommendations, I am happy to concede that the report generally does not propose intrusive new media regulations or expanded government subsidies of "public media".

Here I only want to present two short excerpts that capture key elements of the general tenor of the report:

"Although each citizen will have a different view on which information is important—and who is failing at provid­ing it—Americans need to at least come together around one idea: that democracy requires, and citizens deserve, a healthy flow of useful information and a news and information system that holds powerful institutions accountable."

"Our basic conclusion: with the media landscape shifting as fast as it has been, some current regulations are out of sync with the information needs of communities and the fluid nature of modern local media markets. In crafting recommendations, this report started with the overriding premise that the First Amendment circumscribes the role government can play in improving local news. Beyond that, sound policy would recognize that government is simply not the main player in this drama."

I agree wholeheartedly with both statements. For our democracy to thrive – and I would say, survive – we need a healthy flow of information and news to hold powerful institutions, especially government at all levels, accountable. And as I emphasized in my testimony, the First Amendment circumscribes the role government can play.

At bottom, I still have doubts that such a mammoth government-funded effort was needed, when foundations, universities, and independent academics produce so much research on the subject matter of the report. Nevertheless, I want to commend Steve Waldman, the project leader, and his team, for the effort and dedication they brought to the work.

And I especially want to commend Mr. Waldman for what I came to see, during the study preparation process, as his open-mindedness, his genuine desire to seek out as much information as possible from diverse perspectives, and his sensitivity to the First Amendment concerns raised by government regulation or support of the media. Perhaps I should not have been surprised in this last regard. Mr. Waldman emphasized his appreciation for First Amendment sensitivities when he delivered a keynote last year at a Free State Foundation seminar.

And after I read Mr. Waldman's well-regarded book, "Founding Faith – How Our Founding Fathers Forged a Radical New Approach to Religious Liberty," an insightful study concerning the development of the First Amendment's religion clauses, I came away with the sense he possesses a real appreciation for the Founder's purposes in adopting the First Amendment's protections. In Federalist No. 48, James Madison famously stated: "It will not be denied that power is of an encroaching nature, and it ought to be effectively restrained from passing the limits assigned to it." If you read Mr. Waldman's chapters on Madison, you will understand what I mean when I say his "Information Needs" report is cast in a Madisonian frame.

Finally, I should add that FCC Chairman Julius Genachowski deserves credit for allowing Mr. Waldman the leeway to prepare the study the way he did, and to draw the conclusions he did. I am not privy to any "inside baseball" here, but it is no secret that Commissioner Michael Copps and outside pro-regulation groups wanted a report that recommended much more government regulation and subsidization of the media. Without knowing exactly what the Chairman's role was in the preparation of the final report and recommendations, it was released on his watch, and, in the respects I have mentioned, the effort redounds to his credit.

Sunday, June 12, 2011

Of Timeliness and the Talmud: The FCC's Perspective

On June 8, 2011, the FCC denied a petititon for reconsideration that was filed by the United Talmudical Academy on December 23, 2003. The Talmudical Academy's petition sought reconsideration of two FCC orders,  one issued on January 4, 2000, and the other on October 24, 2003. Both orders involved determinations concerning UTA's eligibility to receive certain universal service subsidies.

The FCC denied the reconsideration petition as untimely because it was not filed within 30 days of the public notice of the action sought to be reviewed as the FCC rules require. Fair enough.

But it does make you wonder why it took the FCC more than seven years to deny a reconsideration petition as untimely when all the agency had to do was calculate that the petition was not filed within the required 30 days. After all, counting the days did not present an issue requiring a lengthy discussion among Talmudic scholars.

Granted, the FCC's action -- inaction, really -- here may not be of great moment. But the fact that the Commission can deny a petition as untimely filed six or more years after the agency should have acted does not inspire confidence in the Commission's ability to handle more important matters.

And the fact that the FCC can do so without displaying any sense of irony makes you wonder whether the Commission really appreciates that it is an institution in need of reform.

I've suggested other reform measures recently, but here's another modest reform suggestion: If the Commission doesn't act on a reconsideration petition within 18 months, it will be deemed granted.

PS. I have a hard copy in hand but I can't find the order on the FCC's website. The agency's website is a whole other story -- one consistent with the theme of an agency that often looks to fix non-existent problems while not fixing real ones. Don't get me started.

Sunday, June 05, 2011

The AT&T and T-Mobile Merger: Thinking Things Through - Part III

The AT&T-T-Mobile merger proposal has prompted opponents such as Free Press and others to mount a mass email campaign against the merger. As thousands of identical, or nearly identical, three or four sentence comments have flooded the FCC's electronic docket, discussion of the role these mass campaign web-generated comments should play in the FCC's deliberative process has increased.

Here's my comment on the FCC's consideration of mass comments.

It is a fact of digital-age life that such mass comments increasingly flood administrative agency dockets. To be sure, there are some downsides to this phenomenon, not least of which are the costs imposed on the agency in terms of personnel, data processing, and other resources required to handle the comment tsunami. Nevertheless, there is a value in enabling citizen participation and citizen input in government decisionmaking processes that cannot ignored. While letter-writing campaigns to influence agencies occurred before e-filing became commonplace (the FDA's rulemaking proposal in the 1990s to assert its authority over tobacco generated approximately 100,000 citizen postcards and letters), electronic filing obviously greatly facilitates such citizen input.

While the FCC's merger review proceeding is not technically a rulemaking, the FCC, for procedural purposes and to facilitate public participation, treats it essentially as an informal rulemaking proceeding under the Administrative Procedure Act. With respect to rulemaking proceedings, the APA states simply that the agency shall consider "the relevant matter presented." This directive generally governs the FCC's actions on merger applications as well. In other words, in reaching a decision, the agency can't just ignore relevant facts and arguments presented.

Of course, the directive to consider relevant matter doesn't tell us much at all about the weight to be accorded thousands of identical or nearly identical e-comments. As I mentioned at the outset, the pro-regulatory group, Free Press, is leading a campaign to generate mass comments opposing the merger in which it suggests sending this (or a similar) comment to the FCC:

"AT&T's takeover of T-Mobile would stifle choice and innovation in the market, harm, consumers, and lead to higher prices and fewer jobs nationwide. Don't let AT&T put our mobile future at risk. Please stand with me and reject such reckless consolidation of the mobile industry."

So, the FCC's docket now contains thousands of three sentence comments identical to this one. After you have read the very first one, the next 10,000, or the second 10,000, do not add any "relevant matter presented" at all.

Now, this is not to say that the FCC's decisional process should totally ignore the fact that thousands of identical comments have been submitted. Even taking into account the increasing ease with which Free Press and others can generate mass comments through web-based campaigns, the sheer number of such comments may indicate to the Commission that the AT&T-T-Mobile proposal has generated intense interest among the American public concerning the merger's potential impact and that, much more than in the run-of-the-mill proceeding, the agency should carefully consider such impacts.

But the FCC should take care that it not become, or allow itself to be viewed as becoming, an agency that makes decisions based on counting noses, or that gives undue weight to comment counts. Because if it does so, it will substantially diminish whatever credibility it possesses as an "expert" independent agency that renders decisions based on the facts and the law. Certainly, the agency would destroy any notion that its decisions are "data-driven," as FCC Chairman Julius Genachowski is fond of proclaiming. If you take another look at the mass comment generated by Free Press reproduced above, you will see that it contains no data at all.

Of course, the aversion to mere nose-counting is not a one-way street. For example, AT&T has made a point of highlighting the number of mayors and governors that have submitted comments supporting the merger. Standing alone, the sheer number of these public officials submitting comments shouldn't be outcome-determinative either. But to the extent that individually-drafted submissions by public officials, such as this letter from Arkansas Governor Mike Beebe, contain information concerning present or projected wireless coverage, local businesses, schools, and other institutions that will be affected by increased or faster wireless service, investments made by infrastructure providers in the local area, and the like, they ought to be given considerably more weight than the three-sentence mass comments. Certainly, there is a degree of political accountability that arises when public officials express views on issues that lend credence to the substance of their positions.

In the end, neither the sheer number of mass-produced comments, nor the number of filings of mayors and governors, ought to be as important to the FCC's decision concerning the merger as its fact-based analysis of the wireless marketplace and the public benefits that the merger may be expected to produce. While Free Press and others should not be precluded from generating mass comments, if that is their wish, it is incontrovertible that the FCC's competitive and public benefit analysis is not going to be aided much by such comments.

As readers of this space know, I have been very critical for many years of the FCC's merger review process for reasons I think are entirely valid. A recap with links to several more pieces is here. And I remain critical of this Commission's pronounced pro-regulatory proclivities and general disposition to downplay marketplace competition and dynamism. Be that as it may, it does not seem too much to ask, as the merger review process moves forward, that the Commission separate the wheat from the chaff when it considers comments.

Wednesday, June 01, 2011

State Regulators Should Refrain from Reviewing Wireless Mergers

The U.S. Department of Justice and the FCC are undertaking their respective reviews of the AT&T/T-Mobile merger. But Sprint is urging state regulators to conduct their own merger review proceedings. For instance, Sprint urged the West Virginia Public Services Commission to review the merger. Meanwhile, the Louisiana Public Service Commission has sought public comment on the AT&T/T-Mobile merger, but not opened an actual investigation. And the California Public Utility Commission has opened an inquiry concerning the proposed merger.

State regulatory reviews of wireless mergers raise policy concerns about needless and harmful duplication of review efforts. Like other telecom mergers, AT&T/T-Mobile is already subject to separate reviews by two federal agencies. State reviews add yet another layer of multi-agency proceedings to the merger review process. The more agencies conducting reviews, the more likely such reviews are to delay the overall merger process and saddle merging parties with administrative and lost market opportunity costs. And federal law preempting states' authority over wireless rates and entry casts serious doubt about the legal authority of state regulators to place conditions on wireless mergers.

We have previously pointed out significant process concerns with state public utility commission (PUC) reviews of telecom mergers. Many times merging parties gain approval only after state PUCs obtain a series of so-called voluntary concessions that serve as conditions for approval. Those conditions, such as broadband investment and build-out imposed by some state PUCs in the CenturyTel-Embarq merger and in other mergers, may, by themselves, appear laudable. But they are frequently unrelated to any conceivable competitive harm posed by the mergers. For example, some state PUCs reviewing the Qwest-CenturyLink merger and the Frontier-Verizon transactions expressed concerns about the financial solvency of the respective parties following the proposed deals, but they nonetheless imposed conditions requiring the acquiring parties to spend even more money on broadband. Such conditions can also result in ordinary business decisions regarding service and pricing options being cemented into enforceable regulatory mandates that quickly become outdated, assuming they are not unwarranted at the time they are adopted.

State PUCs' leverage over merging parties makes it tempting for such agencies to impose ambitious regulatory-minded conditions on proposed mergers. This is especially so when outside interest groups and competitors press for conditions on the merging parties. In some instances, state PUCs impose conditions on merging parties that they otherwise lack the power to impose through rulemaking because of the narrow scope of their delegated authority. This only heightens concerns about regulatory power grabs posing as state merger reviews. But the individualized nature of mergers means that onerous conditions amount to company-specific regulation that may result in unequal and unfair treatment. Significant policy initiatives should not be the subject of state merger conditions, but where necessary should instead be implemented through industry-wide rulemaking proceedings.

There are additional reasons unique to wireless for keeping states out of the merger review process and avoiding a further agency review pile-up. Wireless merger reviews are incommensurate with states' limited scope of jurisdiction over wireless. And wireless carriers typically don't have carrier-of-last resort or other special public interest obligations that legacy wireline providers have by virtue of rate-of-return or price cap regulation.

All of these policy concerns raised by state regulatory reviews of wireless mergers apply with vigor when it comes to the AT&T/T-Mobile merger. The proposed deal is already subject to scrutiny by DOJ and the FCC. Reviews by those federal agencies will focus on any anticompetitive harm posed by AT&T/T-Mobile. To the extent that the merger raises any anticompetitive concerns in particular geographic markets, the federal agencies conducting market analyses can adopt targeted remedies. In recent telecom merger reviews such as AT&T/Centennial and Verizon/ALLTEL, for example, the FCC ordered partial divestitures of assets in specific geographic areas by merging parties as conditions for approval.

Importantly, serious legal questions about jurisdictional authority surround state regulatory reviews of wireless mergers. For starters, it is questionable whether states have any authority to review such mergers under federal law. The FCC is primarily entrusted with managing the spectrum resource. And in 1993, Congress amended the Communications Act, thereby providing in Section 332 that the federal government has exclusive authority over the "rates charged" for wireless services and "entry" of wireless carriers. States, however, were permitted to continue regulating only "other terms and conditions" of wireless services.

It is reasonable to regard any state regulatory approval for mergers of wireless carriers as a regulation of wireless entry. But if that's the case then states are categorically preempted from subjecting mergers of wireless carriers to regulatory approval.

But even assuming federal law jurisdiction over wireless entry does not categorically preempt state regulatory approval requirements for wireless mergers, one could still reasonably conclude that federal law prohibits states from requiring wireless carriers to receive PUC approval under certain circumstances.

A strong case can be made that federal law restricts state merger reviews of wireless carriers in at least some important respects. For instance, if a state's PUC's review becomes especially prolonged and demands made by the state agency become particularly onerous, such a review could effectively serve as a barrier to market entry for merging wireless carriers within the contemplation of Section 332's preemption provision. Also, federal preemption of wireless rates would most likely mean that no state PUC could make wholesale or retail or other rate-related terms a condition for its approval of a wireless merger.

To be sure, there is a dearth of case law authority concerning state merger approval of wireless carriers. But that is hardly surprising given the similar dearth of cases regarding the merger review authority of the FCC. Merging parties essentially give up any grounds for challenging onerous conditions on the approval of their respective deals because they are said to be voluntarily agreeing to them. Moreover, merging parties who have already spent vast sums of money and time in moving their proposed mergers along the process want to close the deal. Moving administrative disputes into litigation incurs even more costs, delays and uncertainties that merging parties cannot afford in today's competitive landscape.

One shouldn't expect state PUCs to go out of their way to suggest they lack regulatory authority to subject wireless mergers to conditions. But given their limited authority over wireless, they should be expected to realize they are not typically in the best position to review wireless mergers. In fact, the West Virginia Commission provides an example of state regulators sensibly deciding to avoid entangling themselves in mergers that are already subject to review by federal agencies. On prior occasions, West Virginia regulators declined to review mergers involving voice carriers such as Bell Atlantic/GTE, SBC/AT&T and Verizon/MCI, citing ongoing federal reviews. And when it comes to AT&T/T-Mobile, the PUCs in West Virginia and elsewhere should follow the hands-off course once again.

Whatever one's opinion about the merits of the AT&T/T-Mobile merger, those merits should be addressed at the federal level. No wireless merger should be bogged down with the unnecessary costs and delays resulting from duplicative state merger reviews that, in any event, may be in conflict with federal law. Hopefully, West Virginia and other states will show a lot of restraint when it comes to wireless mergers such as AT&T/T-Mobile and defer to the DOJ and FCC merger reviews already underway.