Regulation

The FCC's retransmission rules now perversely cause consumers to suffer unnecessary collateral damage in retransmission negotiations -- the exact opposite outcome the FCC wants -- in large part because the FCC's retransmission rules have not kept pace with dramatic competitive and technology changes over the last two decades.  

• The FCC should, and easily can, protect consumers from becoming unnecessary collateral damage in retransmission negotiations by simply updating their nearly twenty-year-old FCC regulations with petitioned common sense modifications that ensure consumers never find themselves unnecessarily in the "bulls-eye" of the FCC's out-dated retransmission rules again.

To better understand how rules that possibly made sense in 1992, could produce predictably perverse and dysfunctional consumer outcomes today, think of the retransmission rules, like a regulatory "gun" that was originally and permanently pointed directly at a 1992 cable monopoly and no one else. 

There are many valid reasons why industry is highly skeptical of the FCC's many rhetorical assurances that nothing bad will happen from the FCC's planned regulation of broadband for the first time as a Title II common carrier service.

First, in response to the Comcast court decision, the FCC is hastily gambling away the benefits of broadband's proven "solid business foundation," in its longshot bet to win back an unproven "solid legal foundation" for the FCC.  

• The FCC apparently is ignoring that restoring the FCC's legal "status quo" comes at the expense of the broadband industry's long-time status quo of being unregulated and the consumer's status quo of enjoying the benefits of a market driven Internet "unfettered by Federal and State regulation."  
• Despite employing all the soothing words the FCC thinks the industry wants to hear, industry is much more interested in actions than words, as actions are what affect their businesses -- not words. 
  • Simply, industry is increasingly watching what the FCC does rather than what it says.
• The fact is industry is not reassured that nothing bad will happen to them, because the FCC has announced it plans to apply the most onerous foundational common carrier regulations on the broadband industry for the first time without any defensible justification or legal authority to do so. 

Second, the assertion that there has never been an instance of FCC "un-forbearance," is no assurance, because the FCC has never before reversed an entire sector's regulatory status before either. 

The Achilles heel of the FCC's announced "Third Way Legal Approach" for regulating the Internet is that it is simply not credible.

Incredible claim #1: The third way "does not involve regulating the Internet."

The FCC is vastly understating the systemic risk involved in the FCC's radical "third way" regulatory surgery to the Internet, the communications sector and the economy.

• The FCC's proposed "third way" is an elaborate public relations facade that disguises huge problems and fatal conceptual/practical flaws that will become painfully obvious over time.
• The FCC's proposal is long on politics and soothing rhetoric, but short on real world practicality or legitimacy; it predictably will ultimately collapse under its own weight, complexity and hubris -- unfortunately leaving exceptional carnage in its wake.
• Simply, this proposal is too inherently contradictory and mind-numbingly complex, and too big not to fail.
• This analysis will explain why it is a disaster waiting to happen; it's not a matter of if, but when the "third way" will collapse on itself.

I.  Why this "third way" is a disaster waiting to happen:

The best way to understand what is going on here is to think of the Internet as a brain and the FCC's "third way" proposal as brain surgery to fundamentally rewire how the Internet brain operates at its most basic level.

A common tactic of net neutrality proponents is to assert their desired outcome repeatedly in hopes that it becomes conventional wisdom. Now the Open Internet Coalition asserts that Title II for broadband would be a "solid legal foundation" for the FCC, while FreePress asserts broadband Title II would provide the FCC a "sounder legal basis" for its broadband agenda. 

• Fortunately, under the rule-of-law, legal authority simply cannot be asserted or deemed "solid" or "sound" by political acclamation, it ultimately must be proven and affirmed as solid and sound by a full court process (in the absence of Congress passing a new law.)

Surely the FCC understands that the courts ultimately will decide if any legal analysis defending Title II broadband is solid/sound, especially given:

• The recent D.C. Circuit Comcast decision (which the FCC is not challenging);
• Broadband has never been classified as Title II; and 
• The FCC is hardly a disinterested observer in trying to determine the boundaries of its own authority.   

In the Open Internet reply comments, there are many substantive legal analyses strongly indicating that any FCC decision deeming broadband to be Title II would not be on a solid/sound legal foundation. For just three of the most notable analyses see:

A wide swath of top communications economists have written to the FCC that they do not believe the economic evidence warrants the FCC's proposed preemptive Open Internet regulations, and that the best approach to address the FCC's potential concerns is a case by case approach.

• This high-powered private economic analysis, on top of the DOJ's rejection of the the FCC's alleged market failure thesis, makes it increasingly difficult for the FCC to argue it has legitimate "reasons," that are not arbitrary and capricious, to warrant either deeming broadband to be a regulated service or that the competitive broadband market must be regulated for openness in direct contravention of law, precedent and existing policy.

Proponents of the FCC asserting new "deeming authority," to "deem" broadband to be a regulated phone service and thus subject to the FCC's existing Title II telephone authority, have not even begun to answer the most fundamental questions of what such a foundational change would mean.

• Premature characterizations that this nouvelle regulatory "deeming" would somehow be easy, clean, or containable, simply have not thought through the potential chaos, havoc, and uncertainty that such a radical, foundational, and over-reaching regulatory "deeming" would wreak on:
  • Legal/policy precedent, clarity, and stability;
  • Business investment, and innovation -- assumptions, incentives, models and practices;
  • Economic growth, private investment and job creation;
  • Industry financial stability, contracts, and debt covenants; and
  • Trust, cooperation, and respect the FCC needs to fulfill its mission and its National Broadband Plan.
• Consider the following to be a preliminary, non-exhaustive list of important questions the FCC and others will have to confront, answer and address, before the FCC seriously considers "opening" this potential Pandora's Box of ills.  

FOR IMMEDIATE RELEASE                                                     

April 6, 2010                                                                                          

Contact:  Scott Cleland 703-217-2407

NetCompetition Comments on Impact of D.C. Circuit Vacating FCC Comcast Order

FOR IMMEDIATE RELEASE

April 5, 2010

Contact:  Scott Cleland 703-217-2407

NetCompetition.org Submits Reply Comments on FCC Open Internet NPRM

“A new FCC de-competition policy could take away competition’s benefits from Internet users”

WASHINGTON – NetCompetition.org Chairman Scott Cleland submitted reply comments to the FCC’s proposed Open Internet NPRM.