Standing Before the FCC Shouting Stop

CEI submitted our initial comments to the FCC on broadband policy last month, and this week we submitted our reply comments. A brief overview:

  • International Comparisons: The gap between the US and other industrialized nations is vastly overstated. The differences between the leaders and the rest only amounts to a few months given the current extraordinary rate of growth. Much of our alleged lag is due to the fact that we subsidize broadband less than others, and yet we still seem to get better use out of it.
  • Open Access: Line sharing mandates and other access requirements are just another term for price controls. We’ve tried that before. Price controls either entrench monopolies or deter any investment at all. In order to retain investors, open access regulations would be accompanied by subsidy programs, and past experience with such programs has found them actively hostile to competition as well.
  • Universal Service Fund: Even those who recommend extending the USF to broadband admit that the fund is full of waste, fraud, and abuse. There is no reason to expect future subsidy programs to behave any differently. The snail’s pace with which these subsidies are phased out tends to entrench old technologies beyond their optimal lifetimes. If the money can’t be returned to taxpayers, it would be far more efficient to simply distribute it directly to the underserved customers it is intended to help.
  • Network Neutrality: Advocates of government involvement pretend that the pure, unblemished neutrality of the Internet is under attack. In reality, the Internet has never been so neutral. Companies like Google and Akamai have already spent billions of dollars on server farms, effectively buying “fast lanes” for their own content. Cable television–the largest and most popular proprietary network in the world–travels over the very same wires as IP traffic. Far from hurting the Internet, however, these non-neutral elements have been essential to pay for infrastructure. Neutrality and non-neutrality coexist very effectively online, and if we call on government to deal with this “problem,” we will buy ourselves an expensive lesson in regulatory capture.
  • Special Access: The NoChokePoints coalition doesn’t even hide its intentions to enact price controls. The obscene profits cited by these advocates are calculated from ARMIS data that were never intended to accurately reflect earnings, and their claims have been roundly rejected. Price controls on middle mile wires, in addition to having the same well-known consequences that all price controls do, will also thwart investment in wireless backhaul.
  • Explaining Deficiencies: First and foremost, there is no reason to expect that all areas of the US should have the same preferences regarding broadband, and if some rural areas don’t value broadband highly enough to warrant investment, that is no justification for the FCC to intervene. Second, though broadband growth is extremely rapid, there are plenty of government impediments holding it back from even more impressive growth. The largest by far is spectrum allocation; the FCC and other agencies are holding on to spectrum rights that would be worth trillions of dollars on the open market, and the cost of relinquishing those rights would be orders of magnitude lower.
  • Policy Recommendations: The vast majority of proposed regulations for broadband are just explicit or hidden price controls. There is simply no defense for price controls as a mechanism of policy. The most important goal of the FCC should be to free up spectrum for public and private use. US broadband markets do not need subsidies, much less wasteful and fraudulent subsidies, and those funds should be returned to the taxpayer.