Why We Care About Broadband Policy, Not Competititon.

I’m back from my week of travels, where lousy broadband connectivity prevented me from blogging my trip to the NARUC Summer Conference and trip to Netroots Nation. Hopefully, I will get to fill in some of the blanks. NARUC (the National Association of Regulatory Utility Commissioners) passed some good Telecom resolutions supporting the FCC’s reclassification of broadband back into the Title II telecom box (although reminding the FCC that states have an important role to play and therefore to use preemption sparingly), and urging the FCC to address early termination fees for cell phone services.

So to get the ball rolling, here is a reprint of my opening remarks in the “framing debate” between myself and Ray Gifford from our Wed. morning NARUC Telecom session. As regular readers know, I’ve argued that things like Network Neutrality are right as a matter of economics (that is, they promote a better economic outcome for everyone: see economists make this argument here and here), that it is critical as a matter of First Amendment freedom and to prevent “virtual redlining.” Below I add an additional argument, what Ray characterized (and I agree) is a “progressive era” argument for why we care about broadband policy.

I hope someone made a videotape of my debate with Ray Gifford at NARUC. For my money, it provided the most succinct and straightforward framework for arguing about FCC broadband authority and where we ought to go from here. Ray framed it quite well as a conflict in vision between a classic Progressive Era philosophy and “economic analytics.” While I’m willing to debate in the economic analytics world (the two are not mutually exclusive, and economics informs progressive philosophy as much as concerns about public safety and consumer protection inform economic analytics), I think this makes a fairly good framework for how to approach these issues. Indeed, as a result of framing this as a difference in worldview, we avoided a lot of the acrimony and repetition that usually defines these debates. I hope Ray posts his opening remarks somewhere. I present mine below.

So what do I mean by “Progressive Era philosophy?” It means going back to a basic idea over why we care about services like broadband. When we have a service offered to the public, when members of the public depend on accessing this service reliably, and when a failure to have reliable access can have dire consequences, these services are “affected with the public interest.” For these services, we need some basic safeguards to ensure fundamental fairness and, to the extent possible, prevent disasters before they occur – whether that disaster is limited to a subscriber or small business cut off from a vital service or a failure to serve rural areas or a massive failure on order of a BP or Katrina-type disaster.

For this reason, as the D.C. Circuit pointed out in the NARUC case which remains the authoritative case on what is a “telecommunications service,” whether a service is competitive or not doesn’t matter to whether it’s a telecommunications service. Competition informs what kind of rules we need. When choosing between a basic monitoring and “safety net” function or something more intrusive depends a lot on the presence or absence of competition and how we think companies will behave in a complicated world. Like the economic analytics view, the progressive view absolutely considers the potential cost of regulation. But unlike the economic analytic view, the progressive era view also considers the cost of not acting. The telecommunications services approach recognizes that, as with the financial meltdown, a failure to act in a networked world can have a rapid, system-wide impact that after the fact remedies don’t address. It recognizes that certain decisions, such as not serving rural areas, makes complete economic sense but have dire consequences for those not served. This view also recognizes the limits of economic analytics for the individual without perfect market information and subject to real world constraints even when choosing among competitors. I had my choice of cabs to get from the Sacramento Airport to the convention center, but once I get in a cab and on the freeway, my leverage to negotiate rates and terms drops precipitously. I may have a choice of broadband providers, but if my uploads get blocked or delayed I may suffer harm no ability to switch later can fix.

Similarly, the assurance of economic analytics that providers will avoid pissing off customers does little to help those customers caught up in a provider’s “learning experience.” The fact that “the market” has resolved interconnectivity disputes like Cogent-Sprint in 2008, or sudden shut downs like Northpoint’s in 2001, will not help when a crisis comes up that the market cannot solve. Those who argued BP had every economic incentive to avoid a catastrophic oil spill were absolutely right. The argument that this eliminated the need for things like basic safety regulations, inspections, and accountability turned out to be wrong. From an economic analytics perspective, BP is being properly punished with expenses and liability and we should expect BP and other companies to take proper precautions in the future. For those living in the Gulf, that doesn’t help much.

To conclude, we do not ask government to set rules of the road for vital services like broadband (or roads) not because government magically makes things better, but because government is the only entity able to keep things from going horribly wrong. Broadband access has become what the railroads were in the 19th Century and electricity and telecom were in the 20th — the basis for our economic growth and critical to our standard of living and daily affairs. Critics ridicule the framework of the public interest as “old fashioned” and out of date with the times. This confuses the specific regulation with basic oversight authority. Everyone recognizes broadband is not a railroad, or an electric grid, or even a telephone network. But the same basic principles apply.

We once took pride in having an electric grid and a telephone network that were the envy of the world because they reached everyone, worked reliably, and treated everyone fairly. We should want the same for our broadband networks in the 21st Century.  Those who ignore the quiet role of government in ensuring basic principles of fundamental fairness and standards or reliability in making these previous networks the envy of the world leave us at the mercy of the market. But the market cannot protect either fundamental fairness or impose basic standards of reliability. Without these two principles, our broadband network will not flourish, and we will all pay the price.

Stay tuned . . . .

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3 Comments

  1. John Blevins says:

    Harold – thanks for this.

    Was curious though — would reclassification provide a safety net for a major interconnection/peering dispute? Given that the backbone seems to be off-limits, I’m not sure it would. This isn’t an argument against reclassification obviously (which I support), but just wondering whether the third way safety net is too narrow

  2. Harold says:

    John:

    As with all things, depends on where the dispute takes place. Third Way itself does not reach the backbone. Indeed, it is reasonable to argue that pure backbone providers are offering “telecommunications” but not “telecommunications service” because they do not offer service to the public in an indifferent manner. OTOH, I will not claim to know enough about the nature of backbone contracts now to be able to say definitively one way or another.

    OTOH, the FCC has broad powers to protect Title II services, even under the relatively cramped definition of ancillary authority set forth in the _Comcast_ case. A finding by the FCC that broadband access is Title II provides a necessary predicate for the exercise of authority pursuant to Sections 251(a) and 256 in an emergency — depending on the emergency. I think a conflict between two pure backbone players, something like Cogent/XO, probably remains out of reach because both are pure backbone and therefore not impacted. But a refusal by AT&T and Comcast to exchange traffic would clearly be reachable. More difficult is a dispute like Sprint/Cogent, where Sprint is a provider of last-mile (wireless) service and Cogent is a pure backbone player.

    Again, I would hesitate to say definitively what outcome without knowing specific facts. I simply know that if the entire “Internet,” apparently meaning anything that uses IP, is an information service, then the FCC is powerless to deal with any problem that might occur. For example, in an event such as occurred with Madison River, the FCC appears to be helpless under existing law.

  3. John Blevins says:

    Makes sense — thanks Harold.

  4. […] – so that every exercise of regulation must rely on an exercise of marketpower. Start with this 2010 blog post reprinting my debate with Ray Gifford on the subject and concluding with my most recent rant on the […]

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  1. […] – so that every exercise of regulation must rely on an exercise of marketpower. Start with this 2010 blog post reprinting my debate with Ray Gifford on the subject and concluding with my most recent rant on the […]

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