For well more than a decade now the jurisdictional line between interstate and intrastate communications has become increasingly blurred. As communications have moved from narrowband to broadband networks, and from analog to digital platforms, with transmissions circumnavigating the globe in little more than nanoseconds, at times it can become impractical, if not impossible, to determine whether a transmission is properly classified as an interstate or intrastate communication. In any event, implementing such jurisdictional separations can be costly.
Accordingly, for many years I have expressed concerns regarding the ability of the states, through the exercise of their jurisdiction over intrastate communications, to impede the development of modern telecom networks through overzealous regulation. Because intrastate and interstate communications travel over the same networks, the FCC and the states share jurisdiction over the same physical plant. So an unnecessarily burdensome, unduly costly regulatory regime in one jurisdiction may affect the delivery of telecom services in the other by impacting incentives to invest in upgrading and building-out networks.
This is truer in today's increasingly "IP world"
than ever before, as more and more traffic transitions from legacy analog
telecom networks to Internet Protocol-based platforms, regardless of the
specific technology employed.
Certainly there are a litany of state actions over the years
that might be cited as cases in which the states' exercise of their jurisdictional
claims have failed to take into account the changing telecom environment and
technological advancements.
But, consistent with Louis Brandeis' observation that the states
may serve as "a laboratory" for experimentation, there are other
instances when states, by their example, have led the way. In some sense,
especially in the last couple of years, this is happening in the communications
arena where many states have adopted deregulatory policies. Indeed, some of the
states are ahead of the FCC in adjusting their regulatory regimes to account
for technological advances and today's competitive marketplace realities.
For instance, more than half the states have adopted
legislation or otherwise acted to restrict state regulation of VoIP services.
This is consistent with the recognition that there is no public interest reason
to subject these IP services to legacy telecom regulation.
And on July 22, the Washington Utilities and Transportation
Commission issued an Order
remarkable for the clarity with which the agency explained its determination to
deregulate legacy wireline services. The order addresses a petition for
regulatory relief filed by Frontier Communications earlier this year. The state
commission determined that:
Frontier faces strong competition
for the majority of [its] services throughout most of that geographic area….[T]his
docket affords the Commission the opportunity to acknowledge the realities of
the 21st Century marketplace by reducing unnecessary regulation and
bolstering the ability of Frontier and its competitors to provide effective
competitive telecommunications services to the ultimate benefit of this state’s
consumers. [Page 2]
I commend the entire decision to you. But for those short on
time, here are a few key excerpts that demonstrate the extent to which the
Washington commission, historically not known for its deregulatory tendencies,
is attuned to the changing communications marketplace.
Wireless, VoIP, and bundled service
options to basic single-line service place competitive pressures on providers
of such basic service. Even if Frontier were the only provider of single line
basic service, should Frontier seek to raise its rates for such service
customers could opt for one of these other service options – in fact, that is
what has been happening. While we understand Staff and Public Counsel’s strong
desire to define services narrowly to protect the interests of those consumers
with the fewest competitive alternatives, we do not believe the legislature
intended the Commission to adopt such a rigorously constricted approach in
assessing competitive conditions. Indeed, the narrow market definition Staff
and Public Counsel propose would undermine legislative intent by virtually
ensuring that Frontier could never demonstrate the existence of effective competition
for these services. [Page 19]
To the extent possible, consumers,
not the Commission, should determine whether other providers’ services are
viable alternatives to the incumbent telephone company’s services. The record
evidence overwhelmingly demonstrates that most consumers consider wireless,
VoIP, and CLEC services, individually and in bundles, to be alternatives to
Frontier’s basic residential or small business services….We would be ignoring
reality if we were to accept Staff and Public Counsel’s definition of the
relevant market as limited to stand-alone, single landline residential and
small business services provided at Frontier’s tariff rates. [Pages 19 - 20]
And, finally, in its Conclusion, the Washington commission
summed up this way:
Our assessment of the merits of
Frontier’s Petition for relief from traditional regulation is guided by the
remarkable transformation in the telecommunications industry that continues to
occur…. If alternative providers of telecommunications services exist and the
Company no longer serves a significant captive customer base, we will
substantially reduce historic regulation, particularly economic regulation, in
favor of the disciplines of an effectively competitive marketplace. In the
world as it exists today, our traditional role must devolve to one increasingly
focused on preserving and promoting conditions for competition. [Page 26]
As I said, in years past the state commissions often have
adopted regulatory postures that had the effect, whether intended or not, of
deterring innovation and investment. Not so with regard to the states that recently
have acted to preclude regulation of VoIP services. And not so with respect to
last week's Washington UTC decision.
And now for the moral of the story: The FCC commissioners
and staff could benefit much from an open-minded reading of the Washington state
commission decision. Put bluntly, the FCC has been too slow to provide
regulatory relief in the face of what the Washington commission called
"the remarkable transformation in the telecommunications industry that
continues to occur." The FCC has been too slow to "substantially
reduce historic regulation, particularly economic regulation, in favor of the
disciplines of an effectively competitive marketplace."
Many examples of the FCC's reticence to "reduce
historic regulation" could be given. Here I will simply point out that, in
rejecting several forbearance requests for regulatory relief, the FCC has
continued its failure to account properly for the obvious competitive impact of
wireless and VoIP services. And, based on its actions thus far, it appears unlikely
the agency will consider in a timely fashion the competitive impact of
over-the-top Internet video services on traditional cable and satellite video
services still shackled by outdated legacy regulations.
So, again, if anyone at the FCC needs a copy of the
Washington state commission's decision for inspiration, please just click here.
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