I just filed comments with the House Energy and Commerce Committee responding to their white paper on the Federal Communication Commission’s role in competition. Here is what I filed:
- 1. How should Congress define competition in the modern communications marketplace? How can we ensure that this definition is flexible enough to accommodate this rapidly changing industry?
Congress should avoid defining competition based on the number of broadband providers in a market. Instead, Congress should base its competitive analysis on an assessment of the entire Internet eco-system based on two prongs.
First, are prices for broadband access services falling, unchanged, or not increasing by an amount greater than the annual rate of inflation? If the answer is yes, then the FCC should declare that the consumer market for broadband access providers is competitive. Where consumer demand is negatively responsive to an increase in prices, there should be a declaration that the consumer market for broadband services is not competitive.
Second, do we see continued entry of edge, content, or access software providers into the Internet market? Consumers access the Internet for the purpose of accessing information they can rely on. The value of the information sought and of the network increases where there are an increasing number of information sources. Where the FCC finds the number of edge, content, and app developers increasing, the FCC should declare that edge provider space is competitive.
- 2. What principles should form the basis of competition policy in the oversight of the modern communications ecosystem?
Competition policy should have as its primary principle the maintenance of a regulatory environment that encourages entrepreneurial activity in the edge provider, content provider, and app developer space. Included in this activity is the ability for the entrepreneur to attract capital and deliver to consumers via the Internet innovative products and services.
Promoting entrepreneurial activity results in service providers entering the market and providing services that will keep the information consumer coming back. Consumers gain protection during transactions from the entrepreneur’s delivery of the best service possible with the knowledge that there are other providers willing to occupy his space.
- 3. How should intermodal competition factor into an analysis of competition in the communications market?
It is time for Congress and the FCC to abandon the silo approach to assessing competition in the communications market. The communications market is experiencing what I refer to as Convergence 3.0.
In Convergence 1.0, local phone companies wanted to be long distance companies. Cable companies wanted to be local phone companies. Long distance companies just wanted to survive and were willing to be anything.
In convergence 2.0, traditional wireline companies also provided wireless services and broadband. Cable companies provided wireline, broadband, and delivered video services. Long distance companies went the way of the wooly mammoth.
Today, under Convergence 3.0, Facebook and Google are attempting innovative ways to bring broadband to consumers, with the potential and the cash to offer competitive alternatives to current broadband providers. Apple is making content plays, its most recent being the purchase of a music streaming service. Today’s convergence has more than blurred the lines separating platforms. Convergence has obliterated those lines.
In short, to think about intermodal competition is to go back to the Stone Age also known as the 20th century. Congress must legislate and the FCC must regulate in the 21st century.
- 4. Some have suggested that the FCC be transitioned to an enforcement agency, along the lines of the operation of the Federal Trade Commission, rather than use broad rulemaking authority to set rules a priori. What role should the FCC play in competition policy?
The FCC should play no role in competition and the Communications Act should be updated to reflect that. The FCC’s focus should be on spectrum, spectrum, and spectrum, along with streamlining regulations that facilitate deployment of infrastructure necessary for deploying the nation’s digital communications capabilities.
Its enforcement powers should be carried out to the extent currently reflected in the Communications Act, but broad rulemaking should be abandoned. The Commission does not have a clean crystal ball and should not be in the business of trying to predict how the communications markets will look in the future.
Were the Commission good at such predictions it would not have forced Sprint to divest its landline services prior to its merger with Nextel. Sprint, without a wireline service, in my opinion was placed in a less competitive posture with AT&T and Verizon because of the divestiture.
- 5. What, if any, are the implications of ongoing intermodal competition at the service level on the Commission’s authority? Should the scope of the Commission’s jurisdiction be changed as a result?
Competition between service providers using different platforms should work to reduce the Commission’s authority to regulate versus address disputes between consumers and service providers. Intermodal competition tells me that consumers can choose another provider for their broadband services with the Commission stepping in only to resolve consumer protection issues that statutes give it authority to address.
- 6. Competition at the network level has been a focus of FCC regulation in the past. As networks are increasingly substitutes for one another, competition between services has become even more important. Following the Verizon decision, the reach of the Commission to regulate “edge providers” on the Internet is the subject of some disagreement. How should we define competition among edge providers? What role, if any, should the Commission have to regulate edge providers – providers of services that are network agnostic?
As discussed above, consumers access the Internet for the purpose of accessing information they can rely on. The value of the information sought and of the network increases where there are an increasing number of information sources. Where the FCC finds the number of edge, content, and app developers increasing, the FCC should declare that edge provider space is competitive.
Should the FCC regulate edge providers? No. Edge providers already face technical and financial hurdles to entering edge provider markets. Regulation introduces uncertainty and uncertainty scares away capital investment.
7. What regulatory construct would best address the changing face of competition in the modern communications ecosystem and remain flexible to address future change?
What would be best is for Congress to re-write the Communications Act with the flexibility needed to address changes in technology. That I admit is a tough task and may only be doable if the Act and the Commission did not focus on trying to predict what type of services or what platform services will be provided on in the future, but puts in place an adjudicative process that allows network providers to settle disputes while passing on consumer complaints to the Federal Trade Commission. The Commission’s focus should be on making sure the communications infrastructure is maintained.
8. Given the rapid change in the competitive market for communications networks and services, should the Communications Act require periodic reauthorization by Congress to provide opportunity to reevaluate the effectiveness of and necessity for its provisions?
It took sixty-two years to update the Communications Act of 1934 and 18 years after the last major re-write, Congress is barely inching toward another amendment of the Act. Meanwhile, innovation and convergence are taking place rapidly in the communications markets raising the chance that after the next rewrite the industry will be a lot closer to the 22nd century while the Commission and Congress struggle with the changes they couldn’t keep up with in the 21st.
Periodic updating may be ineffective given the uncertainty that partisanship introduces into the Congress. As I discussed prior, what would be best is for Congress to re-write the Communications Act with the flexibility needed to address changes in technology. That I admit is a tough task and may only be doable if the Act and the Commission did not focus on trying to predict what type of services or what platform services will be provided on in the future, but puts in place an adjudicative process that allows network providers to settle disputes while passing on consumer complaints to the Federal Trade Commission. The Commission’s focus should be on making sure the communications infrastructure is maintained.