Elections certainly matter. But the sheer force of powerful
ideas matters too. That's why the Free
State Foundation masthead proclaims, "Because Ideas Matter."
Reform of communications law and policy in a free market,
First Amendment-friendly, rule-of-law direction is a powerful idea that
ultimately will win out. This is because the present legacy regulatory model,
grounded in outdated notions of static monopolistic markets, is so poorly
suited to the competitive realities and technological dynamism of the digital
age.
It may be that, in light of the elections' outcome, the pace
of communications policy reform will not be as quick as it otherwise might have
been. Nevertheless, from my vantage point, focusing not on politics but policy,
I remain optimistic that the power of free market ideas will prevail, and
sooner rather than later.
Why?
Well, one answer is given by Bruce Owen, a member of the
Free State Foundation's Board of Academic Advisors, in the concluding chapter
of FSF's new book, Communications Law and Policy in the Digital
Age: The Next Five Years. Based on his decades of experience and
scholarly research, Professor Owen explains how the political economy of the
regulatory state creates an anti-reform communications policymaking bias. But
after delivering a blunt account describing this anti-reform bias, Professor
Owen concludes: "This cannot continue indefinitely in an economy that
faces global competition, and therefore
it will not."
I too am confident "it
will not."
Then FCC Commissioner Michael Powell (subsequently FCC
Chairman and now President of the National Cable & Telecommunications
Association) gave a remarkably prescient address in December 2000 at a Progress
and Freedom Foundation conference concerning what he called "The
Great Digital Broadband Migration." In his address, Mr. Powell conceptualized the
challenges facing policymakers in light of the "the great technological
migration" from narrowband to broadband, from analog to digital, that
already had begun as a primary policy reform challenge: The need to focus on
innovation incentives; to implement deregulation of competitive markets; to
rationalize the regulatory structure to account for the "bit is a
bit" phenomenon; and to improve regulatory procedures to make agency
decision-making more efficient.
Although surely there has been some progress since 2000
toward meeting the policy challenges anticipated by Mr. Powell, unfortunately, there
certainly has been backsliding as well due to the strength of anti-reform bias
described by Bruce Owen. (Think net neutrality regulation, increased wireless
regulations, and more intrusive video regulations as prime examples.)
AT&T's "Petition
to Launch a Proceeding Concerning the TDM-to-IP Transition," filed
last week with the FCC, is a useful vehicle for focusing attention on the fact
that the "great digital migration" is by no means complete – and for
focusing attention on the fact that unnecessary regulation necessarily will
slow down the transition to all-IP networks.
While the objective of transitioning to all-IP networks may
be broadly shared, there is, of course, an ongoing battle of ideas concerning
the way forward. I submit that Congress, ultimately, but, the Federal Communications
Commission itself, in the meantime, must reorient communications policy so the
agency's regulatory activity is tied to standards requiring demonstrable market
failure and consumer harm before
government intervention. Presently, the FCC still too readily relies on the
more amorphous standards of "the public interest" or
"reasonableness" or "discrimination" to default to
anticipatory government intervention. These latter standards, the principal hallmarks
of regulatory regimes initially developed in the 19th century designed
to regulate monopolies, are no longer appropriate in today's marketplace
environment.
Why are they no longer appropriate?
Because, whether intentionally or not, in a technologically
dynamic digital environment, application of the monopoly-era legacy standards
stifle experimentation with new business models that may benefit consumers and,
ultimately, enhance overall consumer welfare. The anti-reform bias favors the
status quo over change, and uniformity over differentiation. And it too quickly
presumes – without waiting for evidence of market failure and consumer harm – that
new business models are inconsistent with "the public interest" or
that they are not "reasonable" or that they "discriminate."
The ultimate effect of the anti-reform bias, although never
admitted by the pro-regulatory forces, is to favor government dictates
regarding the parameters of service offerings rather than consumer choice.
Those who favor the status quo, or even more regulation, are
quick to presume that any differences in service offerings, whether related to
price, service quality, or other terms, are "unreasonable" or "discriminatory,"
and what's more, evidence of lack of competition. The pro-regulatory forces analyze
markets in a way that narrows the scope of market definitions, whether by
excluding services that, while, not identical, are substitutable in the sense
of meeting differential consumer preferences. And they downplay potential
competition and new entry. The Commission, for example, in evaluating
competition, still resists the notion that wireless is substitutable for wireline
service. Even as well over 30% of U.S. households have terminated their
wireline service, the agency clings to the status quo view. It is difficult to
conclude that such thinking is guided by anything other than a strong desire by
the agency to maintain its regulatory grip.
This pro-regulatory "one size fits all approach"
that narrows market definitions so as to presume lack of competition necessarily
is incompatible with ongoing experimentation in business models and the
development of innovative new offerings. This type of thinking, which presumes agency
"experts" know which "one size" – which combinations, say,
of speeds, price points, features, functions, or bundles – best serves consumers
reflects a regulatory hubris ill-suited to the digital age.
As Christopher Yoo concludes in his chapter in FSF's new
book: "On a broader level, policymakers would benefit from taking
seriously the possibility that the days of a 'one size fits all' approach to
Internet regulation may well be over and that looking backwards for the lessons
of the past may not always be the past way to promote future success."
I would put it this way. If such "one size fits
all" thinking persists, the FCC will maintain its regulatory grip for
longer than it should in areas in which regulation is no longer appropriate. Perhaps
the regulators – and the pro-regulatory forces – may, in some sense, consider
themselves to be short-term winners.
But this would be wrong. For consumers surely will be the long-term
losers.
* * *
FSF's new book, Communications
Law and Policy in the Digital Age: The Next Five Years, is filled with many
good reform-minded ideas regarding implementation of a free market-oriented
communications policy. You may order the book from Carolina
Academic Press here. If you order from CAP before December 31, 2012,
and use the special discount code MAYFSF12, you will save 20%!
You may also order the book from Amazon here or from Barnes & Noble here.
You may also order the book from Amazon here or from Barnes & Noble here.