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Free State Foundation Policy Seminar

 

"Reforming Communications Policy in the Digital Age: The Path Forward"

June 25, 2014

On June 25, 2014, the Free State Foundation held a policy seminar,"Reforming Communications Policy in the Digital Age: The Path Forward,"in the Capitol Visitors Center, Washington, DC.

 

The Free State Foundation is now releasing a transcript of the seminar's panel session that followed the opening addresses by Senator John Thune, Ranking Member of the Senate Committee on Commerce, Science, and Transportation, and FCC Commissioner Ajit Pai. (The full texts of Senator Thune's speech is here and Commissioner Pai's is here.)

 

The panel discussion was moderated by RANDOLPH MAY, President of the Free State Foundation. The panel consisted of the following participants:  

  • JOHN BERGMAYER, Senior Staff Attorney, Public Knowledge
  • SCOTT CLELAND, President, Precursor LLC
  • ADAM THIERER, Senior Research Fellow, Mercatus Center at George Mason University

The transcript should be read in its entirety for an appreciation of all 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.

 

JOHN BERGMAYER

 

In terms of Title II, we've had this explosive growth of mobile phones, which people keep returning to. They are regulated under a Title II service. Not only are mobile phones all Title II services, they have a forbearance statute. The first forbearance statute was enacted for commercial mobile radio services, not for landline Title II.

 

When you're looking at the success of Title II and what Title II can do, it's actually a very flexible provision that is not narrowly tailored only for the monopoly-era Bell system. It has been applied widely, not just to Internet access but to interconnection and other matters.

 

When we're looking at Title II, it's also important to remember the distinction between Internet access and the Internet. Title II advocates are not calling for the regulation of the Internet but for Internet access services.

 

I absolutely agree that we need to free up more spectrum for various uses. I don't believe that spectrum in the long term is scarce, and our policies should encourage spectrum-sharing and new opportunistic uses. The best proving ground for that is unlicensed. We need to have a balance of unlicensed and licensed spectrum... As part of our spectrum policies and as part of our media policies we need to find ways to allow the video marketplace to evolve and for companies to find their place in the new reality, which is partly driven by technology, but partly driven by consumer expectations of what they want out of video.

 

I also very firmly agree that the area of communications policy that is most ripe for reform is the video regulation. I disagree on the details. But the entire business model of networks to local affiliates to broadcasters to cable companies and the ways they interact is all basically enshrined in law, in statute, in FCC regulation. That makes increasingly less sense as people want to access more over-the-top video services.

 

There are various rules which basically give local broadcasters exclusive rights to certain content that they can enforce at the FCC beyond contract law, beyond copyright law, such as syndicated exclusivity, network non-duplication, things like that. They don't make a lot of sense. It's absolutely true, if you repeal them, they might simply be reintroduced via private contracting and be enforceable through the courts. That would be fine, but having specific FCC policies that say, "This is how the business model for local broadcasting will be," doesn't make a lot of sense.

 

Another example is the way that cable and satellite companies carry programming. They get a copyright license that's a compulsory statutory license for which they pay a government-determined fee. That clears them for copyright purposes. Then they have to negotiate with the local broadcaster for a signal right, not for a copyright to that content. Why do we have this layering of something called a signal right on top of copyrights, which we then extinguish with a compulsory license? Why can't copyright itself simply handle the interactions of programmers, broadcasters, networks, and cable companies? It would be very hard to get there because there have been so many business expectations built up around the current system. So I might advocate for a more nuanced approach than the Scalise approach, which is just "repeal it today and let them figure it out." I might advocate for something a little more slow and staged. But it can be done, and it's a good goal. And it's a good goal that I share with a number of people from across the political spectrum.

 

SCOTT CLELAND

 

There's 184 million of us who carry mobile devices around and several tens of millions of tablets. It's the most modern part of the economy. It is governed by the most obsolete, most out-of-date law. You can't square that circle.

 

Spectrum management in the government is the least efficient part of the market and part of the government, period. Now why would I say that? Why is it not hyperbole? It's a trillion dollar asset. It's essential to the growth of the future economy. It is the only resource in government that has no one -- and I'm telling you, no one -- accountable for how it's managed. Basically, it's government by a 1979 executive order that arranged for a committee to talk within the government about how they handle spectrum. There is nobody that can tell the government, "Oh. Wait a minute. You need to move that. You need to do this."   We manage land. We manage all types of federal property, gold, oil. All these types of things have accountability.

 

It is scandalous what is going on with spectrum in our country. We have a trillion dollar asset that is being mismanaged, that is desperately needed. It's an area where we just need good government. Modernizing spectrum management should be near unanimous in the Congress if they were focus on it and realize that there is no one minding the spectrum store in the government.

 

The Telecom Act took a monopoly and said, "Let's go to competition." Surprise, surprise. When it was a monopoly, it was Title II. But it didn't really take off. Internet access took off. Broadband did not. Modems were invented decades before that time. The FCC was trying to get modems into the world and deployed. But it was all about reselling the slow 56K squeaking service at that time... So when we went to Title I in 2004, surprise, surprise. What happened? Broadband took off because there was none of this Title II wet blanket put over it. When Title II was lifted off, that's when things took off.

 

It's no mistake that the smartphone and the iPhone came about in a Title I world. In the Title II world, they wouldn't have seen the light of day. Why do I say that? Do you know when the cell phone was invented? 1949. Do you know when AT&T asked the FCC to pilot the service? 1949. Do you know when they first approved it? They approved a little bit in 1979, but waited until Japan and Sweden did it first even though it had been invented 30 years earlier. The concept that Title II is somehow pro-innovation or a good thing or led to growth is wrong. It was when Title II was lifted off that the Internet, broadband Internet, took off... Remember there's a smartphone... [E]verything smart about it is not Title II. And we talk about iChat. We talk about all the other services people use on their smartphone. I know the younger folks use it almost never as a phone... So this is not a Title II device. This is a Title I device. Everything that matters and why you have it is because of Title I.

 

ADAM THIERER

 

Just last week CNBC came out with its Disruptor 50, its survey of the 50 most disruptive companies in the world. And only five of the 50 on this list were from abroad; the rest are American. And the number one most disruptive sector was software and computing. That has to tell us something. We had to do something right policy-wise to assure that result. It wasn't just about other natural market forces. Again, I suggest that it goes back to our embrace of the idea of permission-less innovation, the idea that we can embrace these innovations without having to seek prior approval.

 

Think about modern Internet and digital economy policy relative to traditional spectrum policy. Think about how hard it is to just start a new wireless venture or platform or service versus starting a new web-based service or digital application. Steve Jobs didn't need any special regulatory blessings to launch his endless series of innovations over the last 10 to 15 years, iPads, iPhones, iTunes, whatever. He just did it. Google and Microsoft didn't need to file forms with any agency asking how to create innovative search engines, operating systems, email systems, web browsers, or video sharing services, all of which have, in just the last 15 years, radically disrupted traditional media and communications markets precisely because they didn't have to go through that process... Mark Zuckerberg didn't need to petition anybody for permission to launch Facebook and voluntarily provide a massive universal service to over a billion people on the globe and offer them a chance to connect at the most awesome, fair, and non-discriminatory price of all time, zero dollars and zero cents.

 

Could anyone have divined that beforehand if we would have sat down and tried to create the world's biggest social media platform, using some sort of title of the Communications Act?...Now compare that to the world of trying to create certain types of new wireless services. There's endless "permissioning" required, endless paperwork, licensing, and permits to be filed and granted. Months, years go by before certain services and spectrum get allocated or reallocated. Armies of lawyers and lobbyists must be hired to get permission for these blessings. And then there are the layers of state and local authorities that you have to deal with on this front. And then don't forget about the formidable tax barriers. Again, we got the policy right here, too, with regards to the Internet with things like the Internet Tax Freedom Act. By contrast, look at the burdensome and discriminatory way we tax wireless and cellular services in this country. It's insanity.

 

The reality is that nobody can be a technological Nostradamus, stare into a techno crystal ball, and divine our high-tech future. We have to allow this to play out through the natural interaction of consumers and companies, interacting in a free and open marketplace constantly recalibrating their needs and desires to find new and better ways of doing things. That has happened with our digital economy precisely because we did not follow the path set forth in an archaic Communications Act that was passed well in the past. That Act is now still threatening to be applied not just to these new technologies but is still applied to all of these other sectors and burdening them. Those sectors could also benefit from the same idea of permission-less innovation.

 

A PDF of the panel's full transcript, "Reforming Communications Policy in the Digital Age: The Path Forward," is here

 

 

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