In October 2012, the Free State Foundation held a seminar titled "Ideas for Communications Law and Policy Reform in 2013." The program began with a Conversation between FSF President Randolph May and FCC Commissioner Robert McDowell (transcript previously released), and it was followed by a panel of experts discussing their ideas for reforming communications policy by the FCC as well as ideas for revising the Communications Act to reflect today's competitive marketplace and digital realities.
FSF is now releasing a transcript of the panel discussion. As we begin a new year, it is an especially appropriate time to consider the many ideas and perspectives regarding communications policy reform offered by the panel.
The panel, which was moderated by RANDOLPH MAY, President of the Free State Foundation, consisted of the following experts:
ROBERT ATKINSON, President, Information Technology & Innovation Foundation
JAMES GATTUSO, Senior Research Fellow in Regulatory Policy, The Heritage Foundation
DAVID HONIG, President and Executive Director, Minority Media & Telecommunications Council
ADAM THIERER, Senior Research Fellow, Mercatus Center
The transcript should be read in its entirety for an appreciation of the views of each panelist. Nevertheless, in the meantime, immediately below are selected excerpts in the order of the panelists' presentations. These excerpts provide an indication of the various perspectives presented at the session. But, again, the transcript should be read in its entirety in order to obtain a full appreciation of each panelist's views. And if you would like to watch the YouTube video of the proceedings, it is here.
ROBERT ATKINSON
"The world really is a world of intermodal competition with IP-based networks. And we should just recognize that's what it's going to be. We shouldn't be trying to get excess competition. We have competition. It is what it is. And I think it's working pretty well. So with this whole focus on more competitors being better, I don't believe that's the case. We need to think about what broadband is, and what broadband IP networks are in that context."
"We need to be committed to inter-modal competition and not let the desire for intra-modal competition get in the way of doing important things that are cost-saving measures, like retiring the copper network and phasing out the overall PSTN network, just because we think there might be a little bit of intra-modal competition that can ride on it."
"We've got to figure out how to get USF reformed...In some ways, the fund is unsustainable. And I think the Commission generally got it right in their reform order. We have to think about both nomadic and fixed services in the USF world. But we've also got to bite the bullet and say that there's no reason users in high-cost areas shouldn't be paying as much as or more than other users in low-cost areas. The idea that we should be subsidizing high-cost users through low prices is a big mistake."
"We've got to recognize that we're not going to ever provide broadband to everybody in America, at least non-satellite broadband, in the foreseeable future.... We don't have to have fiber to the igloo to make this a successful project for our country. And, therefore, the projects that have some reasonable cost-benefit ratio should be the ones we focus on and not the ones where that just doesn't make any sense."
"We need to just give up on the notion that small ILECs are some inherently good thing...the federal government should be size agnostic. We should neither favor big companies nor small companies. But we have this ideological thing in our nation that small is better than big. Small is usually more inefficient than big. The only area that small companies outperform big companies on is disability payments, workmen's comp and unemployment insurance, which I don't think is a good thing. That's really true. They pay lower wages. They have lower productivity. They invest less in R&D. They export less. But that's an aside. My only point to say is we need to have a policy that encourages ILEC consolidation because scale matters."
"Section 706 basically has two problems with it. One is it presumes that competition is the answer. I don't think the law should presume knowing the answer. It should say that there's a problem and we should try to fix it. But 706 says more competition is the answer. I don't believe more competition is the answer to high-cost areas not having broadband. In some ways, less competition might be the answer. And secondly, I would break 706 into two parts and ask: 'Have we had timely rollout to places that can have broadband that don't need a subsidy?' In other words: 'Where you would expect the market to work, has the market worked?' Then we have a separate set of households in the U.S. where it's going to cost more than what the price would get. So that's where the market wouldn't work. There we should ask: 'How are we doing on that?'" The notion that we're combining all of this together really misses a critical point. So I would redo 706 around that. Maybe it's something the Commission could do on its own."
"On broadband, we need to focus on what the real problem is. The reason why the U.S. lags in the OECD is not because we don't have good broadband. It's because we have people that don't have computers. That really is the problem. Vast numbers of Americans compared to a country like Finland don't have computers. They don't have digital literacy. So if we want more broadband, we've got to do that. "
"On spectrum, giving the Commission credit on the spectrum auctions, we've got to do more. The big low-hanging fruit there is with the federal government. We've just got to get tough with the non-FCC parts of the federal government, who are spectrum hogs and are really wasting spectrum. They could give up a lot of it and just choose not to. Spectrum sharing is certainly one path. But I hate to have spectrum sharing be the sort of thing that gets them off the hook. And lastly, we need to be reviewing spectrum transactions on the basis of consumer benefit and competitive impact. The public interest is best served by allowing those carriers who are doing the best job of investing in their networks and attracting and retaining customers to be able to acquire sufficient spectrum resources to serve customers well. Every time we divide spectrum for these other reasons, we introduce inefficiency, and therefore, we should just recognize we're not going to have massive numbers of wireless providers. It's just not the way the market will work. And we need to make sure that the companies that are doing a good job get the spectrum they need."
JAMES GATTUSO
"Increasingly, the Commission seems to have lost its purpose...The FCC was largely established to regulate broadcasters and telephone companies, under very unique market conditions, with very unique and comprehensive regulation that was developed to address those situations. But traditional broadcasting is shrinking rapidly, and old-fashioned telephone service has become a curiosity. The industries look more like the postal service than the dynamic future industries of tomorrow. Of course, video programming service and telecommunications broadly defined are doing fine. They are growing, but the specific industries and specific technologies that the FCC was created to address are not.
Now, much of the FCC's efforts in recent years have been addressed to expanding its turf beyond the shrinking industries into the new, growing, innovative technologies that are appearing. But these industries don't require the industry-specific, comprehensive regulation of the technologies of the past. They are certainly not perfectly competitive, but they do not exhibit the monopoly characteristics that the 20th Century industries did.
Competition, consumer protection, and privacy can, I believe, be handled better by other agencies rather than an agency dedicated to those specific industries... [I]nstead of looking to expand its turf and develop a role in regulating these new technologies, the goal of FCC regulators should be to draw a line around its own duties. Let it regulate the industries that it now regulates and do no more."
"The Commission should conduct rationalized merger review. The FCC simply doesn't need to compete with the antitrust authorities in determining whether a merger will help or hurt consumer welfare. Ideally, the goal should be to limit review to a determination that the acquirer is qualified to hold licenses. That fulfills the Commission's duties under the statute and allows the competition authorities to make a decision based upon well-established competition law."
"The Commission should start using cost-benefit analysis or, more precisely, regulatory impact analysis, to assess its proposed regulations. Every executive branch agency already has worked under this requirement for 30 years as have most other independent agencies by statute.... I believe the FCC is virtually alone, perhaps with the exception of the new Consumer Financial Protection Bureau, in not having a program of assessing formally the impacts and alternatives to its regulations. This is a screaming exception to the way the regulation is done elsewhere in the country."
"The basic question behind net neutrality rules is competition: Do consumers have choice? Do they have alternatives? That again is a competition question and should be left to the competition authorities. Generally the FCC should not be the one deciding that. It does not have the expertise. It doesn't have the traditions. It doesn't have the precedent that the competition authorities do have."
"The Commission should open up spectrum. This is one area where the FCC should be more involved...The FCC is a government agency. It should go after the federal government and dig out spectrum that is being underused. That may be the most important thing that the Commission can do."
"I think it's key that the FCC act to deregulate on its own first. We were talking about the Fred Kahn example with the Civil Aeronautics Board. Kahn deregulated the airlines in effect before Congress deregulated the airlines. It was more or less a fait accompli. Congress is always hesitant to jump into the unknown even when the argument is clear. What Kahn did was shine light on how a deregulated market would work. He had it well on its way, and Congress merely ratified that. So the FCC's actions are going to be the trigger, if there is one."
DAVID HONIG
"One of the premises that I think all of us, coming at these issues from different perspectives, would or should agree on is the fundamental principle that there shouldn't be regulation unless it's supported by a showing of market failure that harms consumers or imminent failure where the only way to have an efficient, well-functioning, fair marketplace is through regulation."
"We favor not only having incentive auctions quickly, but we wish they had had them yesterday. That's not soon enough for us. We endorsed having them conclude by December 2013 and don't understand why it should take another year and a half, given the current needs. Spectrum shortage is real. The spectrum crunch is real and we hope we won't discover this when we start in January experiencing reduced quality of service and calls being dropped."
"We now support, as an organization, as do virtually all of the other national civil rights organizations, relaxation of foreign ownership restrictions because there's not much access to capital for broadcasting in this country. So let's get some opportunities for foreign capital to come in, which inherently will mean more reciprocity, so that we can expand into foreign markets. It's a global economy, and it's about time we had broadcasters be able to benefit from it in the same way as other technologies do."
"We have a new Telecom Act task force exploratory committee...And we're studying particular means by which the Act could be reformed in a way that would advance consumer welfare and particularly for minorities and the underserved. One is shot clocks with some consequences, so we don't sit around 24 years waiting for a ruling with justifications. Another is forbearance. We certainly are of the view that Title II forbearance is a good thing, and we wish it were extended to Title III and Title VI. This means that some rules frankly should be let go. We don't understand, for example, the need any more to have most rules supposedly favoring localism in broadcasting. We don't know what it really means any more in today's environment."
"There may be two principles that Congress can agree on... One of them is that we've got static rules but a very fast moving dynamic economy... We've never had technology move faster. Technology is now moving faster than the speed that regulation can keep up with it. So that is a new issue that hopefully people will understand. The other one is just to know what market failure means, to define that, and give it some flesh. That is, recognize some areas where they can declare the market has failed or is going to fail until certain benchmarks are reached and others where they think that it has not failed and deregulation should be the default."
ADAM THIERER
For a long time, policymakers have been imposing differential regulatory treatment in policies on different layers of the information ecosystem... Unfortunately, we haven't gotten around to solving it. But let's be clear about the problems that this asymmetrical regulation situation creates for our economy and for innovation. First, it is blatantly unfair to those players who suffer under the more onerous rules. Second, it threatens to roll those old, more onerous rules, standards, and regulations onto new platforms and new speech and communications technologies. And third, as a corollary to one and two, it creates uncertainty and threatens innovation and investment throughout all of these information sectors. It also threatens free speech indirectly. So the solution, which again is simple in theory but more complicated in political reality, is that we need to level the regulatory playing field by deregulating down and not regulating up."
"We need a most-favored nation clause for telecommunications and media. We need to have a simple principle that says the least regulated sector or industry or company should be the standard we accord to all of the players that it competes against today. Because we do live in a world of media and technological convergence, everybody should be treated under the same low level of regulation and accorded the same equal treatment. An MFN clause would be my first idea."
"We need a Moore's law for information technology laws and regulations. Moore's law states that it's the general rule of thumb in the computing sector that the processing power of a semiconductor and, therefore, computers doubles roughly every 18 months to two years. What we need is a principle that every new technology proposal should include a provision sunsetting that law or regulation after 18 months to two years. If technology is going to move that fast in the information sector, the law ought to as well."
"We need to comprehensively reform spectrum, not just through more auctioning, but by according unambiguous property rights in spectrum licenses. That is so we can move away from the idea that the government is always allocating and dictating what you can do with your license."
"We need to comprehensively reform universal service. My preference would be by vouchering it or devolving it to the states to create an honest-to-God telecom welfare program, which is what it's always been, but we just haven't been honest about it. Or, at the federal level, getting a lot more strict about how we budget it for."
"We can live with things like the common law, torts, the law of contracts, anti-fraud statutes, and antitrust. We get by with those in every other major capitalist industrial sector. But for some reason we say, 'Ah, communications and media is special. It's different.' Well, you know what? I do think it's special and different. So did our Founders. They thought it was so special and different that we got our First Amendment, which says 'Congress shall make no law,' and for the longest time, that was the standard of our nation. But then the FCC came along and said: 'Well, we own the spectrum, and we have to dole it out. We need speech rules and the fairness doctrine.' And we go all the way down to things like net neutrality. We're surprised these things happen. They happen because we didn't get our first principles right when it came to communications and media policy."
"Not only is DACA [the Digital Age Communications Act] a great model but combined with the bill that Senator DeMint has introduced along with Representative Scalise on the media front, you have in the makings a really beautiful model for what could be the Telecommunications Act of 2016."
"Both sides have to give a little before we're going to get something. On the Democratic side, you have a problem with a lot of numeric counting of like how many competitors are in each sector, or a preoccupation with trying to plan markets preemptively and a misguided notion that the public interest can be planned preemptively from above. I think they have to be willing to give a little and take a leap of faith the way Democrats did in the '70s and '80s on other types of regulation. The Republicans have a very different problem. The Republicans all too often identify the principles of consumer welfare and deregulation with what industry wants. And they are interested in trying to balance out interests, trying to figure out what one sector should do versus another and how to make all sides happy. That can't be done. All of those sides are going to have to probably bleed a little in a deregulatory world."
A PDF of the full transcript of the "Ideas for Communications Law and Policy Reform in 2013" panel presentation is here.
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And on the subject of reform, FSF's new book, Communications Law and Policy in the Digital Age: The Next Five Years, is chock-full of many good reform-minded ideas for implementing a free market-oriented communications policy suitable for the digital age.
There are essays by Christopher Yoo, Jim Speta, Bruce Owen, Michelle Connolly, Ellen Goodman, and other prominent scholars. You may order the book from Carolina Academic Press here, from Amazon here, or from Barnes & Noble here.
Please consider supporting the Free State Foundation's free market work with a tax-deductible contribution!
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