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Title II Lite May Look Just Like Wireless Regulation… And That’s A Bad Thing

By 25 May 2010 One Comment

As part of it’s justification for Title II Lite, the FCC has made the argument that the “third way” proposal would look very much like the model used for wireless carriers.  In his explanation of the framework, FCC Counsel Austin Schlick made that point.

Nor would identification of a telecommunications service within broadband Internet access be a harbinger of monopoly-era price regulation, as some have suggested.  Congress made mobile services subject to Title II in 1993, but under the model established for wireless services the Commission rejected rate setting.  A wireless carrier’s success, the Commission explained, ‘‘should be driven by technological innovation, service quality, competition-based pricing decisions, and responsiveness to consumer needs — and not by strategies in the regulatory arena.’’ … There is no reason to anticipate the Commission would reach a different conclusion about prices or pricing structures for broadband access.

FCC Chairman Genachowski, at the Cable Industry’s show in Los Angeles a few weeks ago made the same argument. When asked whether rate regulation and wholesale unbundling are off the table, he said:

We’re going to rely on competitive markets.

Asked specifically about concerns that any forbearance would be undone by future commissions, Genachowski said:

In the 17 years that forbearance has been in place under both Republicans and Democrats where the commission has forborn, if that’s a word, from many, many things, there’s never been an unforbearance. It just hasn’t happened. And there are reasons for that embedded in the way forbearance happens. The second thing is in the approach that we put out for discussion – the third way approach – is modeled on an approach that has worked for a number of years, uh, mobile voice. Which has been regulated, which has had very similar treatment for a long time, with forbearance, the same provisions applying and, uh, there’s been great innovation and confidence there.

Do the Chairman’s fellow commissioners feel the same?  Do they see forbearance as a permanent fix?  It doesn’t appear so.

Commissioner Copps is firmly on the record stating that he’s more than willing to change the rules.  In his statement the day the NPRM on net neutrality was released, he stated, “What is reasonable today may be unreasonable tomorrow.”

Copps’ legal staff also have no qualms about the commissioner’s position on regulation.  Jennifer Schneider is on record saying that Copps would love for the FCC to have jurisdiction over everything online.

“Well, I think Commissioner Copps would love to have jurisdiction over everything (laughter)….but he knows that’s not really what the FCC is here for. Right now we’re focusing on this Title I/Title II issue. When it comes to the Internet, and what rides over the Internet, we understand that it’s still young. The industry is still trying to find business models that work. And we certainly don’t want to interfere with that. Ultimately, though, the concern is with the consumer, so if/when things move along and there are issues, which I can’t imagine happening anytime soon, someone will have to step in and I guess we’ll have to wait and see if [it’s] the FCC or some other agency or who knows…” [bold added]

Genachowski and Schlick suggest that competition should drive the process.  The US is one of only two countries in the world with five or more cellular providers.  Wireless customers have a huge array of cellular plans, handsets, and services to chose from.  Despite that, as Ars Technica today notes, the wireless study recently released by the FCC, for the first time, did not find effective competition.

Late last week, the FCC released its annual report on the state of competition in the wireless industry, which for the first time declared that perhaps the sector isn’t as competitive as it could be. AT&T and Verizon own 60 percent of subscribers and revenue, “and continue to gain share,” the report warned.

Before that study was even released, however, the FCC was already conducting a number of inquiries into wireless business practices – most dealing with prices, charges, and business models.  Ars, again:

But the good news, added the FCC, is that the 237-page compendium “provides data that can form the basis for inquiries into whether policy levers could produce superior outcomes.” “Policy levers,” as in regulations addressing exclusive handset deals, jumbo-sized early termination fees, “bill shock,” and the line-sharing rates at which smaller telcos can buy network access to the big carriers, among other possibilities.

Ars certainly seems to see this as the FCC beginning a process to apply new regulations – business model regulation, limits on ETFs and overage charges, prohibition of exclusivity deals and other “superior outcomes.”  While their current forays into this space are positioned as “inquiries” at this point, the list Ars spells out clearly demonstrate a common denominator – how much cellular services cost.

The FCC has already attached merger conditions to a third party, SkyTerra, that prevent the company from leasing spectrum to AT&T or Verizon without FCC permission.  The use of mergers to restrict wireless carriers that were not even part of the merger could easily be interpreted as an effort to shape the industry outside the normal regulatory process.

Once you have made a determination that competition doesn’t exist, and costs are too high, rate regulation is an easy fix for a bureaucracy unhindered by robust imagination.

One Comment »

  • One, Two…. Many Competitors « The Enterprise Blog said:

    […] more: Michael Turk reminds me that the U.S. is one of only two countries in the world “with five or more cellular providers.” Of course, the U.S. is, like the country music duo, both Big ‘n’ Rich — […]