Regulation

Despite Sprint and Clearwire opposing the proposed AT&T-T-Mobile acquisition, expect the DOJ and FCC to approve it, because the DOJ appreciates the facts of vibrant wireless competition and because the FCC will come to appreciate how the transaction actually helps solve many of the FCC's highest priority problems.

As a veteran analyst, who has closely covered most all of the roughly two dozen major communications mergers since the 1996 Telecom Act, it is easy to cut through the critics' standard, hyperbole and histrionics -- that they use to attack every major communications merger -- to get to the rub of this matter.

• The rub here is twofold:
  • First, the market competition facts of this transaction and the DOJ's many analogous precedents from previous similar mergers, provide no basis for the DOJ to try and block this merger; and
  • Second, the communication policy facts of this transaction will help solve many of the FCC's highest priority problems: promoting universal broadband, mitigating spectrum exhaust, accelerating broadband adoption, and promoting economic growth and competitiveness.

Like I blogged that the Comcast-NBCU merger would get approval when the hyperbole and histrionics were similarly over the top and not credible, this acquisition ultimately will gain government approval.

It will be surprising if the Republican FCC Commissioners and a bipartisan majority of Congress do not oppose the FCC's unwarranted war on wireless competition policy.

• The FCC appears to be itching to start another political battle over competition policy with its upcoming fifteenth wireless competition report to Congress, by making another political decision devoid of supporting evidence or merit, that the wireless market does not have "effective competition."
  • Such a fantastical political finding, helps the FCC to ignore Congress and the law yet again, and also to unilaterally impose new sweeping economic regulations on wireless, including net neutrality.

The linchpin of the FCC's de-competition policy to restore the FCC to its pre-1996 monopoly regulation glory days, and to put the FCC in more control of the communications sector going forward, is to politically define away the existence of "effective competition," in order to justify FCC regulation of the mobile Internet.

"The Net Neutrality Debate in Europe is Over" per an excellent commentary by Ben Rooney in WSJ TechEurope.

• Mr. Rooney chronicles the evolving public position of EU Digital Commissioner Neelie Kroes from an original pro net neutrality regulation mindset, to now the opposite -- a more pro-competition mindset where "the commissoner's position now [is] that a competitive market should be able to deliver an Internet to which everyone has access."

For those who follow history, it is truly ironic, surprising, and just plain bizarre that Europe is more pro-competition on Internet policy than the U.S. FCC.

How can this be? To understand this wierdness, look at this remarkable development through the lens of industrial policy.

I posit the reason for this European policy outcome is the fact that Europe does not have a Silicon Valley lobby -- with an aggressive corporate welfare agenda seeking government special treatment, regulation of their competitors, and implicit bandwidth subsidies -- like the U.S. does. 

The stark and ironic contrast between the FCC's European-style, interventionist, regulatory approach, and Europe's more American, non-interventionist, competitive approach can only be explained by the presence of the potent lobbying force of U.S. industrial policy national champions (Silicon Valley -- Google, eBay, Amazon, IAC) in the U.S. -- and the absence of European national champions seeking net neutrality in Europe.

There were lots of important net neutrality developments worthy of comment this week:

1. Level 3's regulatory opportunism failed;
2. There were threats of "revolution" if the FCC Open Internet order is overturned; and
3. The FCC's claimed support at the Supreme Court.

First, I would like to applaud the FCC Chairman for making it clear before Congress that the FCC's Open Internet order "doesn't change anything to existing peering arrangements" and that the FCC "hopes those parties settle and resolve it."

Here are five questions that would be helpful to have the FCC answer concerning net neutrality.

It has now been over a year since Google promised with great fanfare that it would "make a meaningful contribution to the shared goal of delivering faster and better Internet for everyone" by offering "ultra-high-speed broadband networks... with 1 gigabit per second fiber-to-the-home connections... at a competitive price to at least 50,000 and potentially up to 500,000 people."

What is taking so long for Google to do this?

Do the actions of the FCC match the FCC's words of support for the President's commitment to the "least burdensome tools to achieve regulatory ends?"

• Does the FCC truly agree with the President's State of the Union that: "We can't win the future with a government of the past?"

• There is much troubling evidence that the FCC mindset is firmly wedded to the regulatory past and not committed to competitively "winning the future."

There are three disturbing trends at the FCC: preservationism, pessimism and silo-ism -- that all strongly indicate that the FCC's trajectory is more geared toward losing the future than winning the future.

I. FCC Preservationism (Shackling the future with the mindset, approaches and legacy networks/regulations of the past.)

Most of the last year the FCC has been obsessed with FCC historical preservation, i.e. strongly considering restoring the FCC to its past glory days with new Title II common carrier regulation of the Internet, but then settling on a 1934 era interpretation of the FCC's Title I authority at its most boundless.

Has Google shifted its legal strategy from its scorched earth legal tactics to more brand-friendly 'Settlements 'R' Us' political tactics?

• And is Google politically ramping up its lobbying against "search regulation" to try and minimize the restrictions it has to abide by in order to settle the phalanx of serious law enforcement investigations and lawsuits it is facing on antitrust, privacy and intellectual property?

I. There is emerging evidence that Google may be in settlement court-regulation-submission mode.

The FCC has a bellwether opportunity at its February 8th meeting to approve a Broadband Data Modernization proposed rule making, that respects the President's new Executive Order that regulations should be the "least burdensome tools to achieve regulatory ends."

• The FCC has announced that its proposed rule is to "streamline and modernize the collection of data"... "while minimizing burdens on voice and broadband providers."

Why this is an important test case:

The FCC's Open Internet order should be ripe for review and "fixing" given President Obama's pledge in his SOTU speech last night:

• "To reduce barriers to growth and investment, I've ordered a review of government regulations. When we find rules that put an unnecessary burden on business, we will fix them."

Clearly the FCC's preemptive bans, restrictions and economic/price regulation of competitive broadband providers based on scant and weak evidence of any real problem to solve, obviously place "an unnecessary burden on business" and the Administration should "fix them."

As I explained in my previous detailed post: "Why FCC's Net Regs Need Administration/Congressional Regulatory Review," the FCC's Open Internet order violates the President's pledge for regulations to: