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Regulation

Rural Cellular’s Dilemma: Can’t Win the Future, Anchored to the Past

 

The Rural Cellular Association’s opposition to the AT&T/T-Mobile acquisition puts a spotlight on the un-sustainability of the analog rural cellular model that is on the wrong side of broadband change.

 

  • The clear but unspoken subtext of the RCA’s opposition is their recognition that their current subsidized model of rural cellular providers is fundamentally ill-equipped for the competitive broadband era.
  • Simply, the RCA is quixotically trying to drag the anchor of an inefficiently and unsustainably subsidized analog business model into the efficient and competitive broadband Internet future – a recipe for losing the future.

 

Importantly, most of the RCA’s problems exist completely separate from this transaction.

 

The Dangers of Over-Regulating Competition

As a regular reader of Steve Pearlstein's Washington Post's business column, I was dismayed at the consistent pro-regulation frame of Sunday's piece on the AT&T-T-Mobile acquisition: "The Revenge of the Baby Bells."

The hallmark of longstanding bipartisan competition policy has been that if market players have the freedom to succeed or fail at differentiating, innovating and investing to meet consumers' rapidly evolving needs, market forces can maximize consumer welfare much better than FCC regulators can.

 

  • Current fierce communications sector competition on multiple levels, vibrant innovation and massive private sector investment have proven Congress' wisdom in instituting competition policy to replace economic regulation as the best framework to maximize consumer welfare in communications.
  • Without the 1996 Telecom Act replacing economic regulation with competition policy, the Internet would be a fraction of the phenomenon it it today.

 

Thus it is dismaying that Mr. Pearlstein crafted a false choice in his column: "...stick with the competitive, lightly-regulated model and... block a merger... or it could acknowledge... the "telephone" market is a natural oligopoly... and... requires much stronger government regulation."

 

Denying Competitive Substitution is Weakest Link of FCC's De-Competition Policy

In order to justify broadband price regulation in the Open Internet and Data Roaming orders, the FCC and FreePress must continue to undermine Congress' competition policy by denying the increasingly obvious and incontrovertible facts that users competitively substitute broadband services between various broadband technologies like copper networks/DSL, cable modems, fiber, WiFi/WiMax, wireless broadband, and satellite.

 

Pro-regulation FreePress' Fact-Challenged Opposition to AT&T/T-Mobile

FreePress' radical anti-business, anti-capitalism politics lead it to make up or contort facts and analogies in order to promote its world view of a publicly-owned and regulated Internet commons.

In FreePress' latest opposition to the AT&T-T-Mobile merger, FreePress continues to nonsensically analogize this merger with the Ma Bell monopoly.

 

How FCC Data Roaming Order Undermines FCC's Net Neutrality Regulations

The FCC's Open Internet Order is even more likely to be overturned in court than before because the FCC's extraordinary delay in publishing its December net neutrality regulations has oddly moved the FCC's April Data Roaming Order to the front of the line of cases challenging the FCC's overall legal authority to regulate broadband.

 

  • (The April 7 Data Roaming Order was published in the Federal Register 29 days after the decision; the December 21 Open Internet Order may not be published until late summer or fall, 7-9 months after the decision, per Politico's Morning Tech.)

 

 

Consequently both cases are now more likely to be heard in the FCC-unfriendly D.C. Circuit Court of Appeals.

FCC's In Search of Relevance in 706 Report

The FCC's latest arbitrary and capricious torturing of the facts, law, and common sense, in its most recent 706 report, makes it obvious that the FCC is "in search of relevance" and highly insecure about its authority and role in the broadband competition era.

 

  • Apparently, the FCC now sees competition-driven consumer benefits as a threat to the FCC's relevance, role and authority.
    • If the bipartisan policy/law of promoting competition succeeds, then the FCC by definition has less and less to do.
  • It is becoming increasingly apparent that many at the FCC don't want competition policy to succeed, because they vainly believe that the FCC can, and should, mandate social outcomes "better" than market forces and consumer choice can produce via competition.

Thus the pro-regulation forces at the FCC are increasingly and proactively seeking to discredit competition policy wherever possible by ignoring and torturing any facts, evidence, logic and common sense that do not forward their government-centric-view that "expert" FCC regulators invariably know best.

    Consider the common thread between:

    Pro-Regulation Camp Seeks to Undermine Competition Policy in AT&T/T-Mobile Review

    Like pro-regulation forces did everything they could to undermine competition policy to justify FCC net neutrality regulation last year, those same FreePress-led pro-regulation forces are focused in 2011 on trying to characterize the AT&T/T-Mobile combination as a threat to competition -- so that they can impose new regulations on AT&T that they can then try and force on the rest of the industry.

    The problem is that the FreePress-led pro-regulation forces are trying to convince people of the preposterous claim that the AT&T/T-Mobile merger will reconstitute the Ma Bell Monopoly when the obvious facts are that AT&T is no longer dominant 27 years after the Bell-break-up.

    The Senate Judiciary Antitrust Subcommittee hearing on the AT&T-T-Mobile merger is entitled: "The AT&T/T-Mobile Merger: Is Humpty Dumpty Being Put Back Together Again?"

     

    Just like it was preposterous last year that the U.S. was falling behind on broadband because of insufficient competition, it is preposterous that the AT&T/T-Mobile merger will reconstitute the the Ma Bell monopoly.

     

    The Big Unanswered Net Neutrality Questions

    The latest debate over net neutrality regulation in the House Judiciary Committee today spotlighted for me three big fundamental questions that the FCC has still not answered.

    1. If the alleged net neutrality problem the FCC claims to be trying to solve in the Open Internet Order was so incredibly urgent to put in place in December, that everyone's holiday plans at the FCC had to be disrupted, why is the publishing of the rules in the Federal Register happening at such a leisurely, anything-but-urgent, pace?
    2. When the law of the land has a clear national policy bias "to promote competition and reduce regulation," how does the FCC legally justify an FCC Open Internet policy bias to promote regulation and reduce competition?
    3. How can the FCC use an obviously de-regulatory, pro-competition provision of law, Section 706, to legally justify an obviously regulatory de-competition Open Internet Order?

    FreePress Continues to Divide Not Unite

    FreePress' campaign director, Tim Karr, continues to overuse its main political tactic of demonizing anyone that disagrees with FreePress' goal of ridding the world of free market capitalism and property ownership.

    FreePress' play book is all about the politicization of issues -- dividing people, not uniting them.

    Read Randy May's Great NRO Piece "Rolling Back Regulation at the FCC"

    Kudos to Randy May of the Free State Foundation for his outstanding must-read piece in the National Review Online: "Rolling Back Regulation at the FCC --How Congress Can Help Competition Flourish."

    It is a very important reminder that Congress nearly unanimously set U.S. communications policy in 1996 "to promote competition and reduce regulation," in stark contrast to the FCC's Open Internet de-competition policy.

    • Randy is also spot on in encouraging Congress to re-fortify its extremely successful 1996 pro-competition policy by changing the burden-of-proof to assuming competition is superior to regulation, in order to counter the FCC's deep-seated bureaucratic instinct to regulate in order to perpetuate itself.

    Randy is also dead right that the FCC looks backward to preserve its regulatory raison d'etre, rather than looking forward, obeying the law and trusting competition to drive consumer benefits.

    We so need an FCC that genuinely encourages competition and lets consumers and the market choose market winners and losers, not the FCC.

     

     

     

     

     

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    Q&A One Pager Debunking Net Neutrality Myths