Considering Lincoln this week made me think of one of my favorite Lincoln quotes, and recalling that quote made me think of the FCC and its new chairman, Tom Wheeler. No, I am not comparing Tom Wheeler to Abraham Lincoln, so hold the tweets! But Wheeler is a certified Lincoln scholar (see his two books on his bio page), so he is likely familiar with the quote. And I hope he appreciates the point I wish to make.
On April 18, 1864, in his "Address at a Sanitary Fair" in Baltimore, Lincoln said this:
"The world has never had a good definition of the word liberty, and the American people, just now, are much in want of one. We all declare for liberty; but in using the same word we do not all mean the same thing."
If you are not familiar with what Lincoln said about the meaning of liberty that day, you may want to read the short Sanitary Fair address. But what got me thinking about Tom Wheeler – and, frankly, the rest of his FCC commissioner colleagues – is this: What if the word "competition" is substituted for "liberty."
In other words, like so: "We all declare for competition; but in using the same word we do not all mean the same thing."
Certainly, all of us involved with communications policymaking – including those in Congress and FCC commissioners – declare we are for "competition," that we are "pro-competitive." Indeed, in adopting the Telecommunications Act of 1996, Congress declared the statute's intent right up front "to promote competition and reduce regulation."
But what do we mean when we declare for competition? I know by using the same word we do not all mean the same thing.
In his "Opening Day at the FCC" blog, Chairman Wheeler said this:
"During my confirmation hearing I described myself as 'an unabashed supporter of competition because competitive markets produce better outcomes than regulated or uncompetitive markets.' Yet we all know that competition does not always flourish by itself; it must be supported and protected if its benefits are to be enjoyed. This agency is a pro-competition agency."
I certainly agree that competitive markets produce better outcomes than regulated or uncompetitive markets. And, in the abstract, or at the theoretical level, it is hard to argue against Mr. Wheeler's assertion that competition must be supported and protected, so I don't want to quibble.
What I want to do instead is to say a bit here about what "competition" means to me, and what I hope it means to Chairman Wheeler and his colleagues as they move forward in deciding real-world issues on the FCC's plate. Of course, the matter of what "competition" means in various contexts is an ongoing conversation. You can find more than seven years' worth of publications on the subject, with much elaboration, on the Free State Foundation website.
Promoting sustainable competition in the communications marketplace means, foremost, encouraging investment in facilities by service providers, regardless of the technology platform employed. When the Commission (or Congress) creates regulatory regimes that seek to promote competition by granting non-facilities-based providers access or sharing rights to the facilities of others, this is really a form of "managed competition," which most often fails to produce sustainable competition, while at the same time harming consumers. Such mandated access regimes depend, ultimately, on the Commission continuing to regulate the prices and other terms and conditions of access.
Once such a mandatory access, sharing, or unbundling regime is established, even with the notion that it is intended to be temporary, say, as a means to allow new entrants to gain a "leg up," it is very difficult, as a matter of political economy, for the regime to become anything other than permanent, or at least semi-permanent. The Commission almost always is cast at sea in trying to get the "promoting competition" regime just right – in the exact sweet spot, so to speak – amidst all the self-serving pleas for "fairness," "nondiscrimination," and "leveling the playing field."
Even assuming the Commission's best intentions, with the technological dynamism and competitive forces that largely roil today's communications marketplace, it is very difficult for the FCC to possess the foreknowledge and necessary information to ensure that its "leveling the playing field" efforts will actually promote competition rather than deter it. This is because – absent getting the regulated prices, terms, and conditions "just right" – these efforts to establish access or sharing regulations are likely to discourage further investment by those with facilities and also by those who otherwise would invest in new facilities but for the advantage they perceive they have gained through regulation.
While I don't want to discuss them now because I have done so many times before in this space and will do so, I'm sure, many times again, here are a few examples of such past Commission regulatory efforts to promote competition that are highly problematic from a consumer welfare perspective: the Unbundled Network Elements facilities-sharing regime; the Net Neutrality anti-discrimination regulations; the set-top box integration ban; the program access and program carriage video regulations that apply to cable broadband providers; the leased access provisions that apply to cable and satellite operators; and the order requiring Comcast to provide online video distributors with regulated access to Comcast's broadband facilities.
It is not a criticism of the commissioners' good intentions to say that the costs – and I mean not only the direct costs, but also the costs to consumer welfare through the loss of economic efficiency – of such regulatory efforts at "promoting competition" very frequently outweigh the benefits. It is rather a plea for the new Chairman and his fellow commissioners to exercise a high degree of regulatory modesty in today's dynamic telecom marketplace.
As the newly reconstituted Commission moves forward to tackle thorny issues, such as the IP transition and the incentive auction, the agency will be confronted with incessant pleas from various parties seeking "fairness" and a "level playing field" in the name of promoting competition. I have no doubts that the new Chairman and his fellow commissioners will all declare for "competition."
I hope that in using the same word they mean the same thing I do.
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