-By Scott Cleland
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.
1. What would be the statutory or legal bounds to this potential new asserted FCC deeming authority?
Could the FCC deem to redefine any legal definition embedded and affirmed in multiple FCC decisions and legal precedents?How would this new FCC deeming authority practically differ from de facto legislating new national law/policy via an unelected majority at the FCC? Is the FCC or is the Judiciary the ultimate authority over communications-related definitions/redefinitions of terms in law?
2. Given that deeming broadband to be regulated would effectively reverse competition policy with new de-competition policy, and would effectively constitute a competition policy transformation equivalent in market impact to the 1996 Telecom Act’s reversal of monopoly regulation in favor of competition, will the FCC continue to be open, like it was in constructing the National Broadband plan and hold hearings, host workshops and put out a Notice of Inquiry with reasonable comment and reply comment periods, so that the FCC would have the opportunity to benefit from the views of all parties who would be affected directly and indirectly by this potential radical change in current competition policy?
Does the FCC have to cite changes in facts or market conditions? If so, does the FCC have to put those facts out for public comment? Will the FCC give the National Broadband Plan analysis or findings, which were never approved by the Commission, any official weight in its deeming decisions?
3. Given the longstanding bipartisan history of legislating and implementing competition policy, implementing broadband as an information service and not taxing or regulating the Internet, is potentially politicizing the Internet and the FCC with extremely controversial deeming actions the best and most constructive/productive approach to making communications policy and implementing the National Broadband Plan?
How would the FCC justify directly contravening Congress’ bi-partisan Internet policy statement in law, “to preserve the… competitive free-market…Internet…unfettered by Federal or state regulation”? Or the bi-partisan purpose of the 1996 Telecom Act which is to “promote regulation and reduce regulation”?
4. Why is deeming broadband to be regulated so important to net neutrality, if the industry continues to support the FCC’s broadband policy statement and respects the FCC’s oversight role, and if there continues to be no significant violations of net neutrality in the literally quadrillions of communications that broadband providers handle every year?
Why is preemptive restrictive regulation warranted when the broadband industry’s compliance with the FCC’s broadband policy statement is near perfect and the industry has committed to continue to abide by the broadband policy statement regardless of the recent court decision?
Would deeming broadband to be regulated constitute a change in the FCC’s regulatory philosophy, i.e., to no longer support voluntary industry compliance initiatives and to now support preemptive, coercive regulation for potential problems that have not yet materialized after five years of real world experience?
5. If the FCC deems it has the authority to unilaterally change the regulatory foundation of the broadband Internet, do the FCC’s reasons/justification for doing so matter?
Or must the FCC’s reasons/justification not be arbitrary and capricious in effect to those affected by it? In other words, what trumps the general “Chevron administrative deference” that the Supreme Court generally affords agencies in interpreting ambiguous law or does the U.S. Constitution’s separation of powers doctrine and the Bill of Rights trump it in this instance?
6. If reportedly all the FCC has to do to deem broadband a regulated service is provide the court new “reasons,” does that mean the FCC does not believe the ISP “speakers” have any constitutional protection of freedom of speech?
Any constitutional rights to not have their property seized without just compensation? Any constitutional right to due process and equal protection?
7. Under what legal authority or precedent would the FCC base its decision to deem broadband a regulated phone service?
Would it be the Title I authority that the D.C. Circuit Court of Appeals seriously constrained in its Comcast vs. the FCC decision?
If the FCC’s newly asserted authority would be in part based on legal precedent of the FCC’s authority, to what extent would the FCC then need to respect other potentially conflicting legal precedents in deeming broadband to be a regulated phone service?
8. Would the FCC expect that exercise of its new deeming authority to be subject to review by the D.C. Circuit Court of Appeals?
If so, how and to what extent would the FCC’s exercise of its new deeming authority to regulate Internet services, involve a different legal analysis than the D.C. Circuit Court’s legal analysis of the FCC’s authority over broadband in the court’s recent decision on Comcast vs. the FCC?
9. Since the D.C. Circuit Court decision just seriously constrained the FCC’s Title I over-arching potential authority to regulate the broadband Internet, how would Title II authority be deemed to apply to cable, satellite and wireless entities’ broadband services that have never before been regulated as common carriers under Title II?
Would they be double Title regulated? Or would Title II take precedence over other titles?
What precedent or standard would determine what title of law would be operative for what broadband instance, or would the FCC’s asserted deeming authority enable the FCC to “pick and choose” which title and provision to apply to broadband at its discretion at any time?
To what extent would asserting this authority run afoul with the D.C. Circuit’s belief that the FCC’s decisions must be bounded and tethered to express statutory authority from Congress?
5. Could the FCC deem any service that tangentially depends on transmissions to be regulated?
What limits or boundaries would there be on what kinds of services would be subject to the FCC’s deeming authority? What standard would the FCC apply to make clear what services are regulated or unregulated or would no services involving transmission be unregulated going forward?
If the current bright line separating telecom services and information services is not correct, what logic, justification and evidence will the FCC use to justify the new FCC bright line separating telecom services and information services?
4. Does the FCC ever envision that the competition envisioned by the 1996 Telecom Act possibly could succeed and warrant yet another “re-deeming” decision that competitive broadband services are most appropriately unregulated information services?
If not, what is the FCC’s logic, justification and evidence that facilities-based broadband competition cannot succeed in the future?
2. If Congress envisioned a process of moving from monopoly regulation to competition and less regulation, what evidence is there that the broadband market is still not moving towards more competition?
How does the FCC disregard the measures of competition it and the DOJ have always employed in the past (falling prices/increased value, more choices, more investment and vibrant overall innovation) to conclude that competition is not working now and cannot work in the future?
Is there any statutory authority or definition of competition that the FCC can point to in order to justify ruling that competition policy has failed, or the market has failed?
If there is no authority or formal definition of competition, what new framework will the FCC use to decide the question if broadband competition is insufficient to remain unregulated, and why would a new FCC framework be superior to the one previous FCCs have used?
Is the FCC at all constrained by the fact that the DOJ Antitrust Division, the Government’s expert competition agency, rejects the thesis of market failure in the broadband market?
5. What assurances or confidence would currently unregulated application or content providers that depend on transmission have that their services could not be deemed to be regulated, at least in part, by this or some future FCC?
If broadband information services are deemed to regulated, what deeming ramifications, if any, would this have on other information services, like content or applications and the incentives for them to innovate? And is the legal rationale for not deeming a content or application information service to be regulated, logically and legally consistent with the FCC’s potential assertion that broadband is to be regulated?
In other words, what would be the justification for moving the bright-line distinction from one place to another?
4. Does the FCC have any obligation to be consistent and fair in not changing core rules and committments mid-game after companies have invested many tens of billions of dollars of investment, built entirely new businesses around current FCC rules and committed to long term contracts and debt covenants — all based on the current law, precedent, rules and policy?
5. How can the FCC legally justify regulating cable broadband as a Title II service when the FCC has never regulated it as a regulated service?
Ditto cellular and satellite broadband?
3. Does the FCC have any legal or policy obligation or constraint to choose policies that are least disruptive, technologically neutral or have a positive cost-benefit analysis?
4. What lessons has the FCC learned from its disastrous regulatory over-reach over a decade ago in “deeming” it had authority to unilaterally institute UNE-P resale and other requirements not in the Telecom Act?
Could regulatory over-reach in deeming broadband to be regulated have similar consequences to the regulatory overreach of UNE-P and other extra-legal efforts to regulate the prices, terms and conditions of resale competition?
Could it spark a new and unproductive era of multi-year litigation and legal uncertainty that discourages the private investment needed to fulfill the goals of the National Broadband Plan?
Could it distort the marketplace creating uneconomic businesses and bubbles that require ongoing FCC regulatory assistance to remain viable like the disastrous CLEC and fiber backbones models that most all went bankrupt?
4. Will the FCC be open and transparent in its decision process about whether the FCC should seek new authority from Congress, rejustify its Title I authority, or deem broadband to be regulated?
Will the trade-offs, costs and benefits of each of these three options be openly debated and decided according to the Administrative Procedures Act?
In sum, characterizations that FCC deeming broadband to be regulated is easy, clean or containable are premature and not consistent with the many important questions raised above. This radical option could open a Pandora’s Box of ills.
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Scott Cleland is one of nation’s foremost techcom analysts and experts at the nexus of: capital markets, public policy and techcom industry change. He is widely-respected in industry, government, media and capital markets as a forward thinker, free market proponent, and leading authority on the future of communications. Precursor LLC is an industry research and consulting firm, specializing in the techcom sector, whose mission is to help companies anticipate change for competitive advantage. Cleland is also Chairman of NetCompetition.org, a wholly-owned subsidiary of Precursor LLC and an e-forum on Net Neutrality funded by a wide range of broadband telecom, cable and wireless companies. He previously founded The Precursor Group Inc., which Institutional Investor magazine ranked as the #1 “Best Independent” research firm in communications for two years in a row. His latest op eds can be seen at www.precursorblog.com.
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