Comcast Successfully Rebuts Latest FCC Staff Inquiry into Reasonable Network Management

February 3, 2009

To the extent the FCC is fair and remains focused on encouraging competition and innovation, Comcast’s response to the FCC staff’s latest inquiry — asking for clarification of Comcast’s reasonable network management practices– should largely put this particular matter to rest.

  • By way of background, two days before the transition of Administrations, FCC staff sent Comcast a letter asking for clarification of why Comcast’s competitive voice offering uses a different part of the network than Internet-driven VOIP services; and if it does use a different part of the network, why that competitive service should not then be regulated as a telecommunications service.
  • In a nutshell, Comcast’s response showed that it is operating precisely as the law/FCC/Supreme Court has directed and allowed.

I am writing about this from a Net Competition perspective, because this isolated staff inquiry appears to:

  • Ignore settled law and FCC precedent to promote competition; and
  • Be fishing for a new rationale to justify regulating competitive services — like the FCC used to regulate monopolies.
    • The last thing we need in this economic recession is to take a relatively healthy communcations industry, and badly undermine it by creating unwarranted investment/business uncertainty — by re-opening and re-litigating settled-competition issues and definitions in the 1996 Telecom Act.

In addition, I am writing about this specific inquiry, because the mainstream press (WSJ, Reuters, AP) reported on the FCC’s inquiry letter, but has largely ignored Comcast’s response — save for MultiChannel News.

  • This leaves a biased and distorted perception that the FCC will somehow abandon its purpose under the law: “to promote competition… and encourage rapid deployment of new telecommunications technologies.

Why should Comcast’s letter largely settle this staff inquiry?

First, Comcast’s Competitive Digital Voice (CDV) offering is precisely the type of facilities-based inter-modal competition and digital innovation that the 1996 Telecom Act envisioned/enabled and that the FCC’s own policies strongly encouraged/advanced. If Comcast is guilty of anything here, it is helping make Congress’ and the FCC’s competition policies a fantastic success in the marketplace for consumers.

  • From scratch, Comcast has built the single largest competitive wireline telecom business in the U.S., providing consumers with more choice, innovation and price savings.
  • From scratch, Comcast has built the single largest competitive broadband business in the U.S., providing consumers with more choice, innovation, increasing speeds, and price competition.

Second, the staff inquiry appears close to being arbitrary and capricious, since it sets up a “damned if you do, damned if you don’t” dynamic where — despite following the Congress’ and FCC direction in the past — no matter what Comcast does in the future they might be in violation.

  • Legally, the courts won’t allow the FCC to “pick and choose” what part of the law or precedent they will respect and not respect.
  • Practically, no one will invest, innovate or take risks if the FCC is viewed as capricious and unpredictable. For markets and competiton to function, they need the certainty of a fair and predictable regulatory process.
    • Few things could be more poisonous to the success of competition and private broadband investment than if the FCC were to create new and unnecessary uncertaintly over the settled legal foundations of which competitive services will become regulated or not in the future.
  • Moreover, the staff inquiry appears to be capricious in three different dimensions:
    • First, by apparently faulting Comcast for following the law/FCC to create inter-modal facilities-based telephony competition to incumbents, but then criticizing Comcast for using that same alternative facility in a way that non-facility-based VOIP providers cannot.
      • This is the worst kind of whipsaw — expecting them to take the private capital risk to invest billions in building an alternative ubiquitous telecom infrastructure, but then changing the rules mid-game for no good reason — and not letting Comcast use it’s network as it was originally designed and intended — to compete against telecom incumbents and offer new broadband service.
    • Second, by implicitly threatening that what the FCC used to classify as an unregulated information service, may not continue to be un-regulated unless Comcast abandons its differentiated inter-modal competitive voice offering to make its digital voice offering like that of every other Internet-based voice provider.
    • Third, by creating the perverse outcome, where a consumer would not be able to get the current choice of a separate, stand-alone Comcast Digital Voice offering, because the FCC abruptly changed its mind and decided that every VOIP provider on the public Internet should get the same network treatment as every private managed-IP service.
      • That would perversely reduce true consumer choice, and diversity of offerings, by de facto mandating that no facilities-based provider can offer a better value than non-facilities-based Internet competitors.
      • Implying that investing in and owning facilities is somehow de facto discriminatory — would be one of the fastest ways for the FCC to dis-incent investment, depress growth, and discourage hiring.

Bottom line:

If the FCC is fair and serious about promoting competition and innovation, Comcast’s response to the FCC staff inquiry should largely put this issue to bed.

  • The law and precedent matter; and they are clearly on Comcast’s side here.

Finally, it bears repeating again — the last thing we need in this economic recession is to start with a relatively healthy communications industry, and then badly undermine it by creating unwarranted investment/business uncertainty — by re-opening and re-litigating settled-competition issues and definitions in the 1996 Telecom Act.

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