Tuesday, February 21, 2012

FCC Must Make Better Sense of Section 706

On February 6, the FCC released its order to reform and modernize the Lifeline program. This includes measures to curb waste, fraud, and abuse, elimination of the Link-Up program except for certain recipients on Tribal Lands, and launch of as a pilot program for subsidizing broadband services low-income consumers.

These are important reforms. Lifeline is directed toward individual low-income consumers, as opposed to universal service fund (USF) subsidies made to carriers. As we have stressed in FSF public comments to the FCC and in prior blog posts, programs like Lifeline should serve as the model for universal service policy. The FCC should eventually sunset all subsidies to carriers. It should strive to make a targeted and transparent approach generally embodied in Lifeline the exclusive mechanism for all future universal service subsidies.

However, it would be remiss not to mention that the FCC wrongly grounds part of the legal basis for its Lifeline reforms. In paragraphs 331 and 332 of its order, the FCC invokes Section 706 as a source of regulatory authority.

But as FSF's public comments to the FCC in its latest Section 706 Inquiry explain, that section is a directive that the agency exercise regulatory forbearance and other means to accelerate deployment "by reducing barriers to infrastructure investment" – operative term being "reducing" – and not an independent grant of regulating authority. In prior rulemakings the FCC has sought to re-interpreted Section 706 as a new source of regulatory power. And the Lifeline reform order provides the latest installment of the FCC's revisionist approach.

Here credit is due to Commissioner Robert McDowell. While voting to approve the Lifeline reform order he continued his principled dissent from the FCC's twisted reading of Section 706. As Commissioner McDowell noted:

Providing a subsidy to consumers for broadband access does not constitute infrastructure investment nor does it promote competition. I disagree with the Order’s line of reasoning that providing a government subsidy to individuals somehow translates into removing infrastructure barriers because it could free up revenue to be used for buildout.

Given the FCC's persistence in re-interpreting Section 706 to mean a power to regulate broadband, it appears that only a future court ruling will set things straight.