We have heard over and over again how regulatory uncertainty can impede decision making on the part of business. The same holds true for the communications industry. In an article published in the National Review Online, Kevin Hassett provided an example of the dampening effect on growth ill-advised policy can have.

Mr. Hassett referred to the Federal Communications Commission’s finding that transferring licenses from T-Mobile was not in the public interest and that such a transfer would have a negative impact on competition. What Mr. Hassett points out is that decisions like the one by the FCC would have a negative impact on the nation’s growth. He wanted us to envision the collective negative impact these types of decisions would have on an industry that accounts for one-sixth of the economy.

Private investment, such as the investment that would have been initiated by the merger, is at the base of any economic recovery. As much as we may talk about government making investments, it was private investment that drove growth during six years of the Clinton Administration and five years of the Bush II Administration.

On the issue of competition, the FCC’s decision to deny the license transfers was based in part on giving smaller carriers the opportunity to either enter or, in the case of Sprint, stay in the market. Smaller, regional carriers don’t have the economies of scale or other capital necessary to provide the same level of national output of wireless services, even with access to additional spectrum. Just ask T-Mobile.

If smaller carriers are not increasing their services, and AT&T and Verizon are not allowed to increase their services due to a lack of spectrum, these carriers will raise their rates in order to regulate the increase in consumer demand for wireless services. Reduced output and increased prices are characteristics of a monopoly, the very scenario the FCC allegedly wanted to avoid. Consumers get shafted on both ends.

This is the irony of over regulation. Not only is capital investment impeded, but the regulatory agency creates a non-competitive market.

Bruce Mehlman, co-chairman of the Internet Innovation Alliance, shared some insightful thoughts yesterday prior to a discussion on Capitol Hill about the future of broadband and the Internet:

“Pro-Internet policy successes came when government removed barriers, rather than adding new ones,” said IIA Co-Chairman Bruce Mehlman. “Unfortunately those days may be ending. While there is rare bipartisan agreement that the biggest challenge to broadband-enabled growth is lack of private investment and available spectrum, there is growing disagreement on how to fix it.”

I remember 1992 vividly (which means I’m getting old if I can remember anything from 20 years ago vividly). Local telephone companies were facing competition, serious competition, for the first time. There were up to 400 long distance companies in Florida, though most were resellers. Cable companies, who were providing ILEC by-pass services, were testing technology that would allow them to challenge the local phone companies. Regulators were asking BellSouth what the hold-up was in introducing …hold your breath … here it comes …ISDN! The calls for deregulation were growing. Everyone wanted to see truly robust, innovative, and fierce competition in the telecom and advanced services markets.

Yes, there was a time that regulators backed off, and that tactic worked. You didn’t have grass roots organizations hankering to know every minute detail of how a cable company, ALEC, or ILEC ran its business. They were truly consumer oriented, concerned not only about rates, but about the delivery of services to the underserved. Even they wanted to bet on innovation delivering services.

Not today, as Mr. Mehlman correctly surmises. Today with have innovation-hindering net neutrality rules. We have grass roots organizations like Public Knowledge and Free Press actually criticizing minority groups for supporting efficiency of service delivery. These groups have prodded and cajoled the current FCC into an apparent preference for a command and control regulatory scheme. While the FCC talks “robustness” and “innovation”, its actions, supported by grass roots groups that put its consumer ancestors to shame, speak another narrative; a narrative that says that markets are inherently no good.

Bubba and 1992. Along with my slimmer figure, we miss you.

I came across an interesting ex-parte letter to the Federal Communications Commission on the Verizon-Spectrum Co. deal. In the letter Public Knowledge is addressing the FCC’s spectrum screen, a tool the FCC uses to document where available spectrum is located. In the letter, Public Knowledge describes the screen as a tool that can help the FCC “maximize wireless competition.”

Maximize wireless competition? A government agency? The FCC?

The U.S. Department of Justice through its antitrust division may try to ensure competition by addressing market concentration, but even it cannot maximize competition. That’s not its job or the FCC’s.

To maximize competition the FCC would have to take on a command-and-control posture, telling the wireless industry how and where to price services; requiring that all participants share all market, pricing, and consumer information with each other; lower all barriers to market entry; and writing rules that keep zero economic profits at bay for a long enough to ensure that some predetermined number of competitors are in the industry before those profits are allowed to fall to zero.
That’s a tall order, Public Knowledge.

At first blush I thought Federal Communications Commission Chairman Genachowski was starting the FCC’s first reality show. What he announced late last week was a competition to see which eligible telecommunications carriers could identify effective approaches to increasing broadband adoption and retention by low income consumers. At stake is a pot of subsidies worth $25 million with the winners receiving subsidies of up to $100,000 a year for three years to implement their broadband project.

The FCC made it a point that at least one of the submitted projects should address broadband adoption and retention on Tribal Lands. The FCC did not make that point for any of the U.S. insular territories.

It’s too bad. The FCC consistently talks about how broadband can spur economic development and job growth. It goes on and on about robust technology and job creating innovation, but when it comes to delivering subsidies to the U.S. Virgin Islands, the territory gets ignored.

If the FCC is interested in low income citizens adopting broadband, then the USVI provides an ideal laboratory. According to the U.S.V.I. Bureau of Economic Research, 11% of households in the U.S. Virgin Islands live on less than $10,000 a year. One-half of households in the U.S.V.I. live on less than $35,000 a year. Twenty-five percent of Virgin Islanders lived in poverty in 2008.

What is even more unbearable are children living in poverty. Twenty-three percent of families in the U.S.V.I. or 6,206 families were living in poverty, most of them with children in the household. Twenty-four percent of families with related children under the age of 18 live in poverty. Thirty-four percent of families headed by a female live in poverty in the U.S.V.I.

I guess America’s Paradise is just a vacation spot for the FCC. When it comes to making us a part of the policy landscape, it’s not a part of the FCC’s reality.

The Federal Communications Commission issued final rules for channel sharing. The rules are the result of the recently passed Jobs Act that provides for voluntary incentive auctions of broadcast spectrum.

The FCC stressed that channel sharing is voluntary and that broadcasters and other licensees of spectrum will determine whether they want to enter into sharing arrangements. The FCC expects channel sharing to free up spectrum for wireless broadband providers.

Channel sharing doesn’t mean that an over-the-air broadcaster’s only option is to give up its entire spectrum and go out of business. Broadcasters should be able to retain just enough spectrum for one standard definition program stream, while sharing the rest of its 6MHz channel.

Overall, sounds like a non-intrusive policy for freeing up some spectrum for the mobile types while keeping the over-the-air broadcasters operational.