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Congress, FCC Must Update Regulations As Broadband Use Expands, Experts Say

Wednesday, November 28, 2012

By Paul Barbagallo  

Broadband has become widespread, and Congress and the Federal Communications Commission must act to update regulations that were put in place largely in the 1930s to protect consumers from the local telephone monopoly, participants said in a Nov. 27 panel discussion organized by the Brookings Institution.

The FCC currently regulates telecommunications providers under Title II of the Communications Act of 1934, as amended; wireless carriers under Title III; and cable operators under Title VI. But the distinctions between these companies have blurred, as telecom providers now offer video service, cable operators now offer voice service, and wireless carriers offer both voice and data service.

“The proper objective of the FCC, as the regulator in a broadband world, is to maximize consumer welfare,” said Hal Singer, an economist with Navigant Economics. “What that means is removing barriers that discourage competition and refraining from imposing artificial barriers that do the same.”

Singer, presenting policy recommendations from his soon-to-be-published e-book, The Need for Speed: A New Framework for Telecommunications Policy for the 21st Century, said the FCC should eliminate telecommunications providers' “carrier-of-last-resort,” or COLR, obligations--a vestige of monopoly-era regulation which requires telcos to serve customers in areas if no one else wants to.

COLR obligations served a critical need when only telephone companies provided communications services. But when cable operators started offering consumers internet-based telephone service, suddenly those regulatory requirements seemed antiquated, Singer said.

For example, many cable operators between 2000 and 2010 successfully negotiated deals with real estate developers to be the exclusive provider of voice, video, and internet services for new subdivisions. Under state and federal regulations, however, if a cable operator for some reason decided to stop serving a particular subdivision, the legal COLR obligation to serve that subdivision would still fall squarely on the incumbent phone company.

On top of that, telecom providers must also still maintain their copper phone lines, whether they upgraded to fiber optics or not, which Singer argues skews the playing field.

AT&T Petition.

AT&T Inc. is now trying to do something about it. The company has filed a petition with the FCC to launch a proceeding to “facilitate the transition” from telcos' legacy copper networks to all internet-protocol networks.

Such a proceeding, AT&T says in the petition, will help the FCC to better understand the “technological and policy dimensions” of the transition and identify any “regulatory reforms needed to promote consumer interests and preserve private incentives to upgrade America's infrastructure.”

“We have to be able to start this transition from the old to the new, and have the FCC in a position facilitating that, not slowing it down,” said James Cicconi, senior executive vice president for AT&T, at the Brookings event. “The underlying statutes were designed for a Bell monopoly telephone system that doesn't exist anymore.”

“I don't think you can take one segment of the broadband marketplace and separate it off anymore and consider it as being in a silo anymore, when consumer conduct is at odds with it,” Cicconi added. “Increasingly, the commission, even though it knows better, finds itself having to deny the reality.”

To support his argument, Cicconi pointed to the FCC's most recent “706” report to Congress, in which the agency, for the third straight year, found that broadband is not being deployed to all Americans in a “reasonable and timely fashion.”

Though Americans are increasingly “cutting the cord,” and choosing to subscribe just to wireless instead, Cicconi said the FCC refuses to consider wireless as a “substitution” when regulating wired telcos, like AT&T.

“The FCC needs to reexamine the purpose of regulation in markets that are this dynamic,” he said.

Wired, Wireless: No Longer Big Difference?

Speaking at the same event, Michael Powell, former FCC chairman and president and chief executive officer of the National Cable and Telecommunications Association, agreed, calling the FCC's decision to discount wireless services in the 706 report “unconscionable.”

Powell said the FCC should start thinking about broadband not only in terms of speed, but functionality and use.

“Broadband access via a wireless device is a big-time, for-real broadband service,” Powell said. “Investment in this space is all about driving the mobile ecosystem. Remember that 3G [third generation] provided a sufficient base for the rise of the iPhone and the app environment.”

“I love what we do in wireline. We do it well; we're proud of it,” Powell said of the cable industry he now represents. “But to suggest that wireless does not provide competitive discipline and is not a logical extension of the broadband experience is just fantastical.”

Blair Levin, former executive director of the FCC's Omnibus Broadband Initiative, suggested that wireless and wireline broadband may at some point be seen as equivalent services, but pointed to several market “inputs” that could prevent 4G LTE (fourth generation, long-term evolution) from competing equally with cable broadband, for instance.

“If wireless is going to compete it's going to need a lot more spectrum,” Levin said. “I am actually quite concerned that we won't produce enough spectrum out of the upcoming ['incentive auction’] to enable wireless to compete. That is a problem.”

He pointed out, too, that some applications are too bandwidth-intensive for wireless networks to handle in the near term, such as e-health and distance learning.

“It's not clear to me that it competes in the same way,” Levin said.

Powell, citing the FCC's 706 report, responded: “We shouldn't be so quick to make the mark be 'did I cut the cord?’ and only then do we count it.”

Levin, the lone Democrat on the panel, agreed with others who called for the FCC to hasten the transition of phone networks to IP, but urged caution.

“It's really redrawing the social contract that we've had for so long,” Levin said.

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