Transcript Legislative and Regulatory Strategies for Providing Consumer Safeguards in a Convergent Marketplace A Presentation at The Broadband Act of 2011: Designing a Communications Act for.

Legislative and Regulatory Strategies for
Providing Consumer Safeguards in a
Convergent Marketplace
A Presentation at
The Broadband Act of 2011:
Designing a Communications Act for the 21st Century
Washington, D.C. September 30, 2010
Rob Frieden, Professor of Telecommunications and Law
Penn State University
[email protected]
Web site : http://www.personal.psu.edu/faculty/r/m/rmf5/
Blog site: http://telefrieden.blogspot.com/
Opportunities and Challenges Presented
by Convergence

Technological and market convergence has become a reality with IP-

Service definitions created by Congress create mutually exclusive regulatory
silos that don’t work when carriers offer convergent services like Voice over the
Internet Protocol (“VoIP”) and Internet Protocol Television (“IPTV”).

The Comcast case leaves little doubt whether the FCC can apply even
streamlined Title II common carrier, telecommunications services regulation to
information services. Deregulation appears to operate one way, irreversibly.

Congress should create an Internet Service definition with quite limited
nondiscrimination, reporting and transparency requirements for the bit transport
function of ISPs. The likelihood of this: near zero.

In lieu of clear legislative authority the FCC risks exceeding its statutory
authority (Chairman Genachowski’s “Third Way”).

The paper explores what the FCC can and should do in the absence of a new
legislative mandate: impose structural or functional separation of bit transport
from services; require transparency, nondiscrimination and network congestion
reporting coupled with sanctions like that imposed on the Madison River
Telephone Company which blocked DSL subscriber access to VoIP services. 2
centric networking and carrier “quadruple play” offers.
One Size No Longer Fits All

Incumbent firms, in particular, have vertically and horizontally integrated to exploit
technological convergence. While this can promote competition, market
consolidation also occurs through more numerous mergers and acquisitions.

Congress contemplated that public utility, economic regulation need only apply to
core telecommunications services that favored monopolization and scale economies.
Information services qualified for limited oversight as new technologies initially and
perhaps later based on their non-essentialness and the likelihood of sustainable
competition.

The FCC considers statutory service definitions to be mutually exclusive and has
evidenced an inability to apply 2 or more classifications to ventures offering multiple
and convergent services.

Either/or classifications create regulatory quandaries and irrational outcomes: 1) the
FCC cannot provide consumer safeguards when information service providers operate
anticompetitively, and 2) the Commission has to finesse or avoid providing clarity in
classifying services, e.g., having classified basic Internet access (DSL, cable modem,
wireless broadband) as an information service, how can the FCC not treat “over the
top” software and applications as an information service as well?

If the FCC acts consistently VoIP and IPTV would qualify for information “safe
harbors” leading to harmful secondary effects, e.g., a bankrupt universal service fund.
3
The FCC Lacks Regulatory Flexibility

As evidenced by the need to backtrack from near complete abandonment of
broadband access regulatory oversight, the FCC needs to find a lawful way to
impose limited safeguards.

For VoIP the Commission found a way to stretch Title I “ancillary jurisdiction”
in light of the potential economic harm to universal service funding and carriers
providing conventional telephony.

Without ever specifying which statutory definition applies to VoIP that has
access to or from conventional networks (the “PSTN”), the FCC has applied
some Title II requirements ostensibly to safeguard consumers at the expense of
VoIP competitive attractiveness.

VoIP operators with PSTN access must contribute to universal service funding,
support number portability, provide access to subscribers with disabilities, and
install wiretaps for law enforcement.

Remarkably the FCC has avoided classifying IPTV and applying the same sort of
Title I jurisdiction in light of the potential for IPTV to cause economic harm to
television broadcasters and adversely impact public policy goals such as
localism.
4
The FCC Abandoned the Most Effective and
Straightforward Safeguards
While many nations have successfully imposed structural/functional separation of
basic and enhanced services, the FCC abandoned such requirements over twenty years
ago based on unproven assertions of lost synergies.
No one has demonstrated significant economic harm and inefficiency in requiring the
dominant incumbent carrier to split its basic line provisioning duties from other value
added services.
The FCC could but will not pursue this option in light of heavy lobbying pressure and
the benefits the Commission accrues in deregulating powerful stakeholders.
The FCC has eliminated other safeguards still mandated by the Communications Act,
e.g., local loop unbundling based on also unproven assertions that such requirements
cost jobs and remove incentives to invest in next generation network plant.
LLU in other nations has promoted price competition, even for broadband access,
5
without the significant predicted harms.
The FCC Creates Regulatory Quandaries When It
Engages in Results-Driven Decision Making
The FCC’s deregulatory bias creates incentives for the Commission to “fudge” the facts
by failing to generate a complete evidentiary record, relying on stakeholder advocacy
masquerading as facts, generating suspect statistics to favor preferred outcomes and
failing to subject its fact finding to peer review.
Consider the number of instances where the FCC has generated flaws or deceptive
statistics:
ala carte cable;
70/70 rule trigger;
counting media outlets by number regardless of market share;
broadband floor or 200 kilobits per second in one direction;
zip code geographical wingspan for broadband measurements;
99% of all merger proposals approved as ways to “promote competition;”
deliberately obscuring and sanitizing data through redactions and trade secret
classification.
6
Recommendations
The FCC should:
Refuse to grant blanket trade secret/confidentiality requests from
stakeholders;
Resolve to compile understandable, credible, granular, and
reproducible statistics based on reasonable benchmarks;
Seriously consider the consequences of mergers to consumers;
Commit to best practices that would survive peer review;
Use open hearings and compile a complete evidentiary record; and
In the absence of legislation, require Internet Service Providers to
separate their bit transmission conduit function from content; this
would require the FCC to abandon the semantic distinction between
offering and providing telecommunications—part of the flawed
rationale for deregulating broadband access which Justice Scalia in the
7
Brand X case identified as too clever.