MediaFreedom Files Comments on the Comm Act Update with Congress

by Mike Wendy on June 16, 2014

As part of updating the Telecommunications Act of 1996, the House Energy and Commerce Committee sought third-party comment on the state of U.S. competition policy, asking what Congress could do to “understand areas where the law is no longer working effectively and determine areas of improvement to foster an environment for innovation, consumer choice, and economic growth.”

MediaFreedom filed the attached comments with the Committee last Friday, making five recommendations to boost broadband competition and adoption, which include:

  1. Title-based regulatory distinctions must go;
  2. Taxation and similar barriers must be kept to a minimum;
  3. Reform the merger review process;
  4. Release more spectrum; and
  5. The FCC’s Net Neutrality rule must be stopped.

____________

Dear Representative Upton, Rep. Walden, Rep. Waxman, Rep. Eshoo, and Committee Members:

MediaFreedom.org is a free market-oriented 501(c)(3) nonprofit, which works to minimize the Federal Communications Commission’s regulatory imprint on U.S. Internet policy. MediaFreedom urges policymakers to more confidently rely on today’s technological evolution, industry best practices and peer group policing, consumer education and transparency tools, marketplace competition, and presently available enforcement laws to protect consumers from actual, not conjectured, harm. We believe that this approach better serves consumers and the marketplace than do new laws or regulations when addressing most marketplace issues that arise.

The ever-evolving communications landscape is healthy and thriving, ably serving consumers with what they want and need. This is due in no small measure to congressional policy – clearly stated throughout the Telecommunications Act of 1996 – which has sought to “…provide for a pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans…

As explosive as the Internet’s growth has been over the past 18 years, FCC implementation of Congress’ policies, as well as other actions, are undermining the ’96 Act’s goals, adversely affecting, in particular, the vibrant and competitive open Internet.

To this end, MediaFreedom briefly proposes the following:

Title-based regulatory distinctions must go: The convergence of communications services and technologies has made the FDR-era approach of service-based regulation (e.g., Title ll, lll and Vl of the Communications Act of 1934) largely obsolete. Given the rapid and ongoing pace of convergence, a more rational “regulatory” schema would eliminate these service-based distinctions and move to a “consumer harm” standard, based in antitrust law. Buttressing this change would be reliance on increased industry self-regulation, technical collaboration, alternative dispute resolution mechanisms, community policing and expert third-party oversight – all tools which have guided the Internet’s growth since the medium’s inception, well before Net Neutrality came into being. Under this system, regulation built on prophylaxis would give way to enforcement, which would address what factually occurs in the real world, further aided by peer policing. This both protects consumers from actual harm, and frees up more companies to take risk and innovate in a more permissionless and flexible manner, boosting competition to the benefit of American consumer.

Taxation and similar barriers must be kept to a minimum: Though broadband access is nearly universal, Internet adoption remains problematic: One in seven Americans is not online. Perhaps ironically, as policymakers inform us just how “essential” the Internet is for daily living, regressive taxes – or those policies that have the same effect – have placed obtaining communications services out of reach for many, especially society’s most marginalized citizens. To be sure, state and local taxation treats many communications services as if they were “sinful” items like alcohol and tobacco, resulting in taxes topping 20% or more for such services in many states. While states must be free to enact tax policy as they see fit, even if those policies may be wrong, Congress can do something directly and quickly to keep choking taxes off of the Internet by immediately passing a permanent Internet Tax Freedom Act. Additionally, as the FCC rewrites its dubious Net Neutrality rule, Congress – if it cannot stop the FCC from moving forward on Net Neutrality – should urge the agency to allow specialized agreements between edge providers and ISPs, thereby placing the costs of specific network upgrades on the cost causers, not average citizens who, under the previous, illegal rule, were stuck subsidizing Silicon Valley for services they did not use. Bottom line: If the Internet is “essential,” government taxation and similar barriers should be kept to an absolute minimum to improve adoption. Where adoption thrives, competitive response to it will grow, too.

Reform the merger review process: The fractured merger review process is broken, it working primarily through dark room deals that extort public policy and other concessions, which could not be achieved in an open, democratic process. Congress should shut the racket down; give it to a single agency to administer (such as the Federal Trade Commission); put it on a up-or-down vote, 90-day shot clock; and strictly limit the approval process to address the narrow competitive concerns at hand. A merger review process that presents an open trough of opportunity for competitors, “consumer activists” and policymakers to arbitrage for their own gain greatly harms companies’ ability to respond to fickle marketplace demands. This essentially untoward, undemocratic shakedown does not serve the “public interest.”

More spectrum, please: Broadband competition comes in many different flavors. Driven by powerful smart phones, tablets and their apps, as well as expanding wireless LTE networks and Wi-Fi connectivity, over 65% of U.S. broadband connections are mobile/wireless. This growth, however, is being severely tested by the lack of usable spectrum, the lion’s share of which is hoarded by the government. Though the FCC is working, albeit fitfully, to address the need for more licensed and unlicensed spectrum, the federal government – which essentially owns 85% of the spectrum, but effectively uses less than 10% of it – stands in the way of carriers and the general public from accessing more. Not only is this wasteful – with the raw resource enabling wireless to flourish being strictly rationed and thus squandered – it has a negative effect on broadband competition, too. Consequently, Congress should put more pressure on the FCC and the National Telecommunications & Information Administration to more swiftly resolve the technical and other outstanding issues that exacerbate the government-created spectrum crunch. Quite simply, with a greater amount of licensed and unlicensed spectrum available, more competitive broadband options will be available to U.S. consumers.

The FCC’s Net Neutrality rule must be stopped: MediaFreedom has long been a vocal critic of the FCC’s efforts to impose Net Neutrality regulation. Presently, the FCC is rewriting the (needless) regulation to accord with the DC Circuit’s recent ruling, which made key parts of it illegal. Yes, the Commission’s new proposal moves the rule in a more reasonable direction, potentially allowing (once banned) priority agreements between edge providers and ISPs. But, don’t be fooled – this is just the lesser of two evils. No matter how one cuts it, the Commission’s “solution” to a problem that will never exist will one day enable the agency to heavily regulate the Internet and its ecosystem.

If the FCC reclassifies ISPs as Title II common carriers, reclassification also brings the unregulated edge into play because many of its functions look and act like common carriage. This catnip will prove too tempting for the FCC, making it just a matter of time, or change in administration, before the edge gets regulated under Title ll (if the FCC arrives at this rule via its Net Neutrality rewrite).

Perhaps more troubling than this, though, is the FCC’s proposal to use § 706 of the ’96 Act to encourage deployment of broadband infrastructure, allowing the Commission to impose rules just shy of Title ll to preserve “Internet openness,” as well as facilitate the so-called “virtuous circle” of edge innovation the FCC believes has grown the medium.

The DC Circuit’s recent Net Neutrality majority opinion, written by Judge David S. Tatel, approvingly lays out the FCC’s regulatory algorithm as such

“Internet openness, [the FCC] reasoned, spurs investment and development by edge providers, which leads to increased end-user demand for broadband access, which leads to increased investment in broadband network infrastructure and technologies, which in turn leads to further innovation and development by edge providers. If, the Commission continued, broadband providers were to disrupt this ‘virtuous circle’ by ‘[r]estricting edge providers’ ability to reach end users, and limiting end users’ ability to choose which edge providers to patronize,’ they would ‘reduce the rate of innovation at the edge and, in turn, the likely rate of improvements to network infrastructure.’”

But, as Judge Laurence Silberman (who concurred in part and dissented in part on the ruling) rightly points out, that’s a big problem because:

“[A]ny regulation that, in the FCC’s judgment might arguably make the Internet ‘better,’ could increase demand. I do not see how this…prevents § 706 from being carte blanche to issue any regulation that the Commission might believe to be in the public interest.”

Using the court-approved formula for its new § 706-oriented Net Neutrality rule (which looks like the probable result of the rule’s rewrite), it seems that any player who can affect “Internet openness” or edge innovation could be hauled before the FCC and regulated into obeisance if the Commission so determined. Any player, not just those who transmit communications and data. Congress cannot have intended this perverse outcome, which clearly does not comport with the ’96 Act’s pro-competitive, deregulatory policy framework.

Because Supreme Court precedent gives agencies like the FCC an immense amount of deference to do what they want, the only solution to the Commission’s Net Neutrality “solution” is for Congress to stop the FCC from going forward on Net Neutrality. With the entire Internet ecosystem under the boot of the unelected Commissioners at the FCC, permissionless innovation will end, undermining – not boosting – broadband infrastructure deployment and competition. This type of control thwarted innovation and competition for decades under the old Communications Act. Given the rapid pace of technological change and convergence today, there is even less reason to believe that returning to such a “mother-may-I” regime will boost competition and flexibly serve U.S. consumers now and in the future.

 MediaFreedom wants to thank the Committee for the opportunity to comment on this important matter, and we stand ready to offer any assistance as may be needed to help the Committee further understand our positions.

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