2017, the Year the FCC Killed Regulation

December 22, 2017 | by Andrew Regitsky

2017, the Year the FCC Killed Regulation

I know this may sound strange to you young guys and gals out there, but at one time I was a big fan of the FCC. I admired the way commissioners of both parties put aside their obvious political differences to work together for the betterment of the American people.

The Commission's success stories are numerous, including developing a universal service program that made telephone service affordable for virtually all Americans, implementing the requirements of the 1996 Telecom Act to break up the Bell companies and establish competition in both the local and long-distance markets, and establishing harmonious relationships with state public utility commissions to protect individuals and companies.

Perhaps most impressively, most of the key FCC decisions were based on sound economic principles. The large companies in our industry would employ high powered economists to argue their positions and while each economist naturally favored the companies hiring them, at least the Commission got to choose between sound well- reasoned arguments. Boy, how things have changed at the Commission, and not for the better!

If the year 2017 has shown us anything, it is that ideology will trump sound economics every time with this FCC and in fact, all levels of government. As a regulatory analyst my job has always been to predict how the FCC will handle a certain issue and explain how companies will be impacted by that decision. In the old days that required a thorough reading of all the position papers filed in an FCC proceeding and an understanding of the economics of the subject. In 2017, a thorough understanding of an issue is no longer needed to predict an FCC decision.

Take net neutrality. It was obvious in 2015 when then FCC Commissioner Ajit Pai wrote a scathing dissent to the Obama-era net neutrality rules that if he were ever in a majority position at the Commission, he would do away with those rules. The sad part is he did so by selectively using investment and employment data that supported his position while ignoring data that disputed it. Moreover, as I wrote here a few months ago, folks were well-advised not to waste their time reading any of the 23 million public comments filed about net neutrality (the vast majority favoring keeping the 2015 rules), since the three Republicans ignored them completely.

The most striking part of the FCC decision is that by finding broadband Internet access service a Title I information service and claiming that it could not use section 706 of the Act to mandate broadband rules, the Commission literally wrote itself out of the Internet regulation business. Importantly, and virtually ignored by the media is that with its warning to preempt any state efforts to impose their own net neutrality rules, the agency intends to also remove state governments from continuing net neutrality.

Of course, net neutrality was only one of the FCC efforts in 2017 to deregulate based on ideology. The decision to deregulate ILEC DS1 and DS3 special access services in the Business Data Service (BDS) proceeding certainly makes sense in some competitive markets, especially in large cities. However, using an absurd market test based on potential competition did not work in the past and is unlikely to work in the special access market. Declaring a market competitive when there is no actual competition will not check ILEC DS1 and DS3 prices.

The Commission can also be faulted for choosing to limit the Lifeline program to only low-income consumers using facilities-based providers, since in many cases only wireless resellers offer these residents the telephony services they need and can afford. Of course, if your goal is to reduce the dollars devoted to the program, then this decision could be seen as widely successful.

Last but not least, one 2017 proposed FCC action really bothered me, and it came in the Commission's annual Notice of Inquiry (NOI) into broadband deployment.

First, the Commission proposed to make the availability of either fixed or mobile broadband in an area sufficient to meet the requirement that broadband is available.

Then, the Commission proposed to establish for the first time a mobile broadband speed benchmark of 10 Mbps download and 1 Mbps upload that is much lower than the 25Mbps/3Mbps requirements for fixed broadband today.

Finally, if the Commission does establish a 10 Mbps/1 Mbps speed requirement for mobile broadband and then declares mobile broadband as a substitute for fixed broadband, many consumers would be locked into the lower speed as wireless is their only broadband service available. This would be a perverse outcome for a proceeding designed solely to aid broadband deployment. We'll see what happens with this NOI next year.

I don't want to belabor the point, but I believe this FCC is hurting the country by its reluctance to regulate when appropriate. In its leadership absence, key issues will be decided either by partisan courts, a reluctant Congress (which proves time and time again it has only superficial knowledge over telecom issues), or the Federal Trade Commission (FTC).

In 2018 all Internet regulation will fall on the FTC. However, without an extensive background in telecom/Internet issues, it is ill-equipped to handle many of the technical issues it will face. Moreover, the fact that it would apply antitrust laws to individual consumer complaints about ISPs is simply laughable.

In sum, I don't believe that 2017 was a good year for American consumers. In the short run, with less regulations, consumers may do well with companies freed from regulatory shackles offering consumer-friendly products. In the long run, however, without a regulatory limit or backstop, some of us, probably the least advantaged, will pay dearly.

   

  

 

 

 

  

 

    

 

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