Reform FCC—Limit It!

<?xml:namespace prefix = st1 ns = “urn:schemas-microsoft-com:office:smarttags” />U.S. communications policy is at an important inflection point. Cable, telephone and wireless companies aim to compete against each other using the latest technologies. The need for regulatory reform is beyond dispute. How we go about communications reform is the issue de jure. <?xml:namespace prefix = u2 /><?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />


Reform efforts come at a time when the proper regulatory role played by the Federal Communications Commission is in flux. The FCC recently ordered voice over internet protocol (VoIP) providers to offer enhanced 911 (E911) service as a mandatory feature. Yet, the D.C. Circuit Court decided that the Federal Communications Commission exceeded its authority when it established the “broadcast flag” to protect the content of digital transmissions. Meanwhile, the Supreme Court, in its Brand X decision, reaffirmed the role of the FCC in deciding the regulatory classification of cable modem service.


These court cases raise important questions about the future of the FCC. For its part, though, Congress should not expand the powers of the FCC by giving it a new role to regulate the latest technologies. Instead, lawmakers should direct the FCC to simply resolve issues derived from the past AT&T monopoly and government control of spectrum. And then they should keep the agency from regulating new communication platforms, deferring to the communications marketplace for that job. What's more, the current static legal classification of different types of communications services needs to be overhauled.


Current regulation uses two major categories to classify communications technologies. A “telecommunications service,” such as local and long-distance phone service and DSL broadband, is the most highly regulated category. These services are subject to “common carrier” rules that mandate interconnection and are subject to state entry and rate regulation.


The other, less stringently regulated category is an “information service,” which is subject to minimal federal regulation. It is defined as involving the transmission of data that requires manipulation (including the breaking up of data into packets). Examples of information services are e-mail, instant messaging, and cable broadband and television service.


These categories may have worked well in the past, but the distinctions do not apply to today's communication networks. New technologies, such as Voice over Internet Protocol (VoIP), mean local phone service is no longer just an analog transmission over the circuit-switched telephone network. And existing networks are reinventing themselves, such as how cable service can include two-way voice transmissions that resemble telephone service. New WiMax wireless broadband networks are already being deployed in Atlanta and Washington, D.C.


Communications policy must acknowledge that competition between network technologies is a key ingredient not just for competition, but for promoting a national broadband policy. The best way to create a fertile environment for achieving President Bush's goal of universal broadband access by 2007 is through a series of deregulatory legislative initiatives.


First, Congress should establish clear boundaries as to whether an area of communications should be regulated by federal or state governments. Additionally, Congress must restrict the role of the FCC in future communications regulation. The FCC of the future (if it is to exist at all) should be limited to applying general unfair competition rules similar to that of the Federal Trade Commission.


Moreover, a next generation communications policy must distinguish economic regulation from social welfare initiatives. While there is certainly some overlap, the distinction between economic and social regulation is the end goal.


Social goals include furthering access to the 911 system for users and to the network for law enforcement wiretapping. The goal is not to improve the inner workings of the market, but instead to pursue some benefit to a certain class of consumer, user or government agency. However, when social policy becomes too ingrained in economic regulation, the livelihoods for each become interdependent even though their underlying rationale is often vastly different.


The muddle of different economic and social polices in telecom law has created market disparities that impose business costs, set an unbalanced playing field for competition and ultimately hurt consumers.  That's why Chairman Kevin Martin has said that the FCC should rollback regulations on telephone broadband. “We'll need to move quickly to establish regulatory parity between telephone companies and cable companies that are providing a broadband service,” said Chairman Martin in a recent interview.


Regulatory parity should be a common theme for all aspects of communications regulation. Policymakers should view lightly regulated Internet communications as a baseline and move legacy communications toward it through deregulatory parity. Going forward, communications regulation deserves more than a mere “update”—largely, it must be phased out.