What’s the Broadband Plan Implementation Vision? Affirming Competition Policy? or The “Retro-genda?”

July 14, 2009

At core, Congress has asked the FCC to recommend to Congress HOW “to ensure that all people of the United States have access to broadband capability.” Arguably the FCC’s main “fork-in-the-road” decision in developing its National Broadband Plan is whether to recommend to Congress to:

  • Re-affirm the current competition vision/law/precedent for broadband policy and build upon the strong foundation and momentum of facilities-based competition in the marketplace? or
  • Design the more Government-centered broadband ecosystem policy recommended most prominently by FreePress/Open Internet Coalition members, and re-build the common carrier regulation regime of the twentieth century?

What engine of choice will the FCC recommend to Congress:

  • Competitive forces and private investment? or
  • Government forces and taxpayer money?

In other words, will the FCC:

  • Affirm a competitive broadband ecosystem where consumers vote with their wallets about which innovations, technologies, and companies succeed or fail on the merits? or
  • Endorse a regulatory broadband ecosystem where regulators largely pre-determine which innovations, technologies and companies will be favored, and hence win or lose?
In requiring the FCC produce a National Broadband Plan for key Congressional Committees, Congress is basically asking the FCC to recommend to Congress what laws/provisions/policies need to be changed to promote universal broadband and to tell Congress what the FCC believes it can do under its own existing authority. Specifically, Congress asked the FCC to develop:

  • An analysis of the most effective and efficient mechanisms” for ensuring widest broadband access;
  • A detailed strategy for achieving affordability…and maximum utilization of broadband…” and
  • a plan for…advancing” roughly fourteen different “national purposes.”

I. Will the FCC affirm competition policy and build upon the strong foundation of facilities-based competition?

The 1996 Telecom Act (and the follow-on decade of FCC and court decisions) effectively replaced longstanding monopoly regulation with competition policy, which has resulted in:

  • Both the incumbent telcos and cablecos losing over a third of their market share in their core businesses;
  • Long distance/data transport prices falling over 95%;
  • The U.S. having more facilities-based broadband competition more ubiquitously, and diversely than any country in the world;
  • The private sector investing hundreds of billions of dollars to build and modernize America’s communications infrastructure; and
  • A loaded pipeline of infrastructure investment that will produce dramatically more broadband speed and capacity in the months/years ahead:
    • Verizon’s FIOS, Cable’s DOCSIS 3.0 upgrade, and wireless broadband’s LTE upgrade and WiMax build-out, to mention the most prominent.

The 1996 Telecom Act also established core Internet policy: “It is the policy of the United States — to preserve the vibrant and competitive free market that exists for the Internet and other interactive computer services, unfettered by Federal or State regulation.”

  • This competitive vision for the Internet unfettered by regulation has been central to the Internet’s growth and innovation.

Moreover, the U.S. broadband sector is one of the most solid and dynamic large sectors in the economy today.

  • It is substantially outgrowing the broader economy without government assistance.
  • It is also contributing disproportionately to U.S. productivity growth.

In a word, competition is an essential foundation of broadband policy.

 

II. Or will the FCC design a more Government-centered broadband ecosystem policy and re-build the common carrier regulation regimes of the twentieth century?

Retrograde is the defining characteristic of the more Government-centered broadband “Retro-genda” advanced most prominently by FreePress/Open Internet coalition.

The “Retro-genda” envisions the FCC as an “easy button” to turn back time to a simpler more government-controlled era.

  • The call for communications to be viewed as public infrastrucuture, like the interstate highway system — is 1950’s thinking.
  • The call for a return to monopoly Carterfone regulations to prevent wireless exclusives or terms of service for the competitive wireless companies of today — is 1960’s thinking.
  • The nostalgia for a return to a perfect end-to-end Internet architecture with zero bit interference — is 1970’s thinking.
  • The open access call for a return to structural separation of wholesale and retail operations and unbundling — is 1980’s thinking.
  • The call to not auction spectrum to reward the taxpayer, but give away valuable spectrum — is pre-1993 thinking.
  • The call for net neutrality and mandated non-discrimination, like the pre-broadband, dial-up era — is 1990’s thinking.
  • The call for re-regulating special access prices and emphasizing resale competition over facilities-based competition — is more 1990’s thinking.

In a nutshell, the “Retro-genda” is all about:

  • Regressing broadband policy back to the common carrier era of rotary phones, wireless brick-size handsets, and dial up Internet access;
  • Rewriting the 1996 Telecom Act;
  • Re-doing the forced UNE-P resale experiment; and
  • Re-litigating the telecom services vs. information services definitions, which have already been settled by the Supreme Court.

In closing, the FCC has a tightrope to walk here. As the FCC learned with the implementation of both the 1992 Cable Act and the 1996 Telecom Act, heavy-handed economic-regulation can backfire and ultimately crash private investment and economic growth. Thus, the Plan must balance promoting the competition policy that has been proven to work with over 90% of the country, with the need to lift up the remaining part of the country where broadband competition has yet to prove economic.

  • The ultimate equation of success that the National Broadband Plan will be judged by in the years ahead will be:
    • Was the National Broadband Plan a “net plus” or a “net negative” from the original baseline foundation and trajectory?

Lastly, in devising the National Broadband Plan, the FCC has to answer these fundamental questions:

  • What does the private sector do better than Government in broadband?
  • And what does Government do better than the private sector in broadband?

A key challenge for the FCC in devising a National Broadband Plan will be to get the best out of both the private sector and the Government without the two being at cross-purposes.

 

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