“I took off a weekend
this month
Just to try to recall
the whole year.”
Those lyrics – which I am now singing to myself, and you can
too – kept coming to mind this past weekend, in this sense. There is so much
happening, and so quickly, on the communications policy front that I often spend
the weekends just trying to recall what happened during the past week – and trying
to make sense of it all.
I am not necessarily proud to admit that this is the way I
spend a good part of my weekends. It ain’t “Margaritaville,”
for sure. But we are in a critical time for determining the future direction of
communications policymaking, so I do so freely in the hope of changing
attitudes, if not latitudes.
Here are some observations that I put together this past weekend,
relying on current FSF work, regarding “Competition Policy and the Role of the
Federal Communications Commission,” net neutrality regulation, and FCC Chairman
Tom Wheeler’s promotion of municipal broadband systems. As you might suspect,
they are all related.
First, I put “competition policy and the role of the FCC” in
quotes because this is the title of the House Commerce Committee’s Third White
Paper seeking public comment as part of the committee’s process to update the
Communications Act. I have said many times that the Communications Act is in
need of updating, and I am pleased that Free State Foundation scholars have
participated actively in the House committee’s process.
A proper understanding of “competition policy and the role
of the FCC” is at the core of understanding why and how the direction of
communications policy needs to change. While I hope you will read the entire
paper, I want to highlight and emphasize a key portion of the Free
State Foundation submission:
A combination of rapid technological innovation,
consumer choice, and disruptive changes in the communications market has
altered forever the traditional competitive landscape. These profound
structural and technological changes point to the need for a competition policy
that leaves free from government regulation those market processes that
continue to propel further innovation and competition for new services. Regulatory
intervention is only warranted in instances where there is convincing evidence
of a market failure that is likely to harm consumers. Absent such evidence of
market failure, service and product suppliers should be free to exercise their
informed business judgment in an entrepreneurial fashion. Their success will be
shaped by how an ever more sophisticated generation of telecommunications
consumers respond to their business offers.
The interaction of both sides of the market place will outperform any effort
by the FCC to chart through government design the direction of future
innovations in the ever larger and more complex Internet marketplace.
This statement of competition policy principle should
guide Congress as it considers revising the Communications Act. And it also should
be a guide for the FCC, presently, under the present statute when the agency is not
otherwise constrained by a contrary statutory direction.
Which brings me to net neutrality, where the Commission is
certainly not constrained by the statute to take any action at all. Indeed, since
the agency’s second judicial rebuff in its attempt to impose net neutrality
mandates, I have suggested many times that it would be prudent to await further
direction from Congress. While it may be, at least in the D.C. Circuit’s view,
that the Commission is authorized to act, it is not required to do so.
But let’s assume that the Commission’s majority is
determined to move forward to adopt some form of net neutrality regulation. The
specific approach the Commission takes matters a lot, of course. For reasons I
have delineated over and over, classifying Internet providers as common
carriers under Title II almost certainly would stifle the future development of
the Internet. Internet providers – and the reach could extend to so-called edge
providers as well – shouldn’t be turned into public utilities like electric companies
and put in the same regulatory straightjacket devised to control monopolies.
If the Commission adopts new net neutrality regulations,
it should adopt the approach proposed in the rulemaking notice to the effect
that it will not interfere with the Internet providers’ practices if they are
commercially reasonable. If implemented properly, this “commercial
reasonableness” approach could provide the ISPs the flexibility they need to
experiment with offering new services responsive to changing technological
capabilities and consumer demand.
In light of the technological dynamism and
multiplatform competition that exists in the broadband marketplace – with
cable, telephone, fiber, satellite, and various wireless companies all offering
consumers alternative choices for Internet service – the proper approach for
the Commission is to presume that, absent clear and convincing evidence of
market failure and consumer harm, Internet providers’ practices, including
practices involving prioritization of services, are commercially reasonable. In
other words, the rebuttable presumption should run in favor of not imposing new public utility-style
regulations on Internet providers.
In short, absent convincing evidence of market failure and
consumer harm, “commercial reasonableness” should be presumed, not the other
way around. Were the Commission to adopt this approach, it would take a step in
the direction of adopting rules that, while perhaps unnecessary, represent a possible
way forward. This would be a principled approach consistent with the Free
State Foundation submission to the House Commerce Committee.
Now, finally, about Chairman Wheeler’s ongoing suggestions
that he’s contemplating getting the FCC to act to preempt the 20 or so states
that have adopted either an outright ban or some form of restrictions on
municipal broadband systems.
By way of explanation for his possible support for
preempting these state laws through FCC action, in line with previous
statements, Mr. Wheeler simply offered this: “Being pro-competition means being
pro-competition.”
Well, yes, but….
Of course, the matter is not all that simple. All
so-called “competition” is not the same. For example, in the Free State Foundation’s
submission to the House Commerce Committee, we focus on the importance of
facilities-based, cross-platform competition as opposed to competition derived
from government mandated facilities-sharing regulations. And, directly to the point
here, for more than five years, we have examined some of the many failures of
government-owned municipal broadband systems. Here are just some recent FSF
pieces recounting the failure of many
government-owned networks: Burlington Telecom’s
February $10 million settlement with Citibank over loans to its ailing system,
along with examples of municipal “broadband busts” including Mooresville and
Davidson, North Carolina, Utah’s UTOPIA network, Provo, Utah, Lafayette,
Louisiana, and the N.C. Eastern
Municipal Power Agency.
I have never taken the
position that, as a matter of policy, there may not be rare circumstances when
construction and operation of municipal-owned telecom systems would be proper.
If it is clear that private sector companies are unable or unwilling to offer
service, then there may be a proper role for a municipal system. But these rare
circumstances have little to do with proclaiming a “pro-competition” mantra or
with the policy impetus behind the state laws that Mr. Wheeler now contemplates
preempting.
As my FSF colleague Seth Cooper explained earlier this year
in a Perspectives from FSF Scholars: “Such
laws prevent local government conflicts of interest with the private sector
marketplace competitors who invest tens of millions of dollars in localities to
build out their broadband
networks. They also protect local taxpayers from potentially devastating
financial losses from poorly-run municipal broadband projects.”
In
short, the tax and other documented financial advantages, along with other
preferences such as permitting privileges and rights-of-way preferences, conferred
upon government-owned communications networks means it is too simplistic to declare
for “competition.” In order to have a serious discussion, Mr. Wheeler surely must
grapple with the underlying fundamental distinction between government and
non-government networks that are the impetus for the adoption of the state bans.
And
aside from these policy questions, Mr. Wheeler must grapple with the legal
questions, including serious constitutional questions, which arise in any
discussion concerning preempting state laws restricting municipal networks.
Here it suffices to refer to Seth Cooper’s excellent seminal piece on the
subject, “FCC Preemption of State Bans
on Municipal Broadband Networks Is Most Likely Unlawful.” In any proper conception of
our federalist constitutional system, it can’t be enough to blithely suggest
that the wishes of municipalities should prevail over the state sovereigns
under which they are created.
After
all, in our constitutional regime, we do not recognize, as a matter of legal
status, “citizens” of Provo or Lafayette, but we do recognize citizens of Utah
and Louisiana – and the Constitution confers upon these state citizens the
authority to exert their will, through either their elected representatives or
sometimes through referenda, to adopt laws that restrict municipal activities.
Well,
it is another week, which I’m sure will be all too busy. But this is the way I
was thinking, over the weekend, about last week. Hoping to spur, if not changes
in latitudes, then perhaps some changes in attitudes.
* * *
By
the way, I’m sure that we’ll be discussing all these issues, and more, at the
Free State Foundation’s seminar on June 25, at which Senator John Thune will
deliver the opening keynote address. If you haven’t already registered, you may
do so by clicking here.
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