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How Congress and the FCC can avoid future Section 257 proceedings

On 25 March 2016, the Federal Communications Commission circulated an item regarding a Section 257 market entry barriers proceeding. The purpose of the proceeding is to prepare and distribute a report to Congress detailing regulatory barriers to entry faced by telecommunications and information service providers. The Commission is also expected to promote policies that favor diversity of media voices, vigorous economic competition, and technological advancement.

I think the biggest barrier to information services providers is not a bunch of rules or the Communications Act itself. It is the philosophy behind describing information services; a philosophy that is still silo-based; that separates broadband access providers from websites, information portals, and search engines. All these platforms have the exchange, gathering, repackaging, and sale of data or information in common and it is time that the Commission recognize this basic characteristic of the digital jungle.

The anti-ISP posse will argue that firms like Verizon and AT&T should not be viewed as mere information service providers because they also sell access services; that content providers and consumers rely on these gateways to access information. The anti-ISP posse have a very limited point when they distinguish Verizon or AT&T from other information services based on their access services. The New York Times, an online digital content provider, may be able to hire delivery boys but it won’t shell out billions for deploying networks just to deliver one publication to their subscribers. Paying last mile, mid-mile, or content delivery networks is more economically feasible for them to get their content out. But if we treated the information markets as an exchange, I believe there is an opportunity to create a model that increases opportunities for smaller content providers while getting the Commission and probably Congress out of the business of trying to make the information markets efficient.

Congress and the Commission should explore a blended exchange/independent system operator model for internet service providers. ISPs trade on information. The information markets in this blended model would be coordinated by a “central ISP”, similar to the regional transmission or independent system operators found in the electricity markets. Carriers, such as AT&T or Verizon, would voluntarily turn over functional control of their networks to this central ISP. In order to trade on this central ISP platform, information service providers such as Facebook, Hulu, Amazon, Google, etc., would buy seats on the central ISP’s exchange, similar to a stock market exchange. As a member, the information service provider would have a say in how the exchange is managed. As long as the information service provider has the annual fee to get a seat or membership, they must be allowed to join.

Yes, I hear your next question. “But what about the lone blogger who wants to get his content out there or the start-up information service provider who can’t afford a seat?” My first response would be “value.” ┬áMy second response would be, “tough nookies.”

ISPs are looking for content of great value. Smaller content providers will have to step up their game and demonstrate to ISPs that their content should be added to the ISPs portfolio of video and text goodies. And if a content provider cannot demonstrate this value, then tough. The content provider will have to either find another way to distribute content digitally or accept that the digital content world isn’t ready for her…yet.

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