Feature Article

October 22, 2014

Politicizing Communications Policy: A Threat to Broadband Investment?

We know the FCC as the Federal Communications Commission. It was created by a Congressional statute and formed by the Communications Act of 1934 to regulate interstate communications by radio, television, wire, satellite and cable in all 50 states, the District of Columbia and U.S. territories. There are six unique areas that the FCC is focused on: broadband, competition, the spectrum, the media, public safety and homeland security.

According to the FCC's mission statement, it is designed to "make available so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex, rapid, efficient, nation-wide, and worldwide wire and radio communication services with adequate facilities at reasonable charges."

In addition to the mission statement, under Section 706 of the Communications Act, the FCC is charged with encouraging "the deployment of advanced telecommunications services to all Americans." All five of the FCC's commissioners, in an effort to support the private investment required to fulfill this mandate, have made it clear that they plan to provide investors with "regulatory certainty."

Unfortunately, over the last few years, we have seen that the FCC has become quite unpredictable. The reason for this is seen as the increased politicization of the agency's deliberative process. The role of the FCC is to look out for the consumers regardless of what the politicians want. This point was made perfectly clear by President Obama when he was talking about what the FCC plans to do about net neutrality. Last week the president said, "My appointee, Tom Wheeler, knows my position. I can't, now that he's there, I can't just call him up and tell him exactly what to do."

A new study was released last week by the Phoenix Center titled, “The Unpredictable FCC: Politicizing Communications Policy and its Threat to Broadband Investment.” The Phoenix Center is a not-for-profit organization that studies broad public-policy issues related to governance, social and economic conditions, with a particular emphasis on the law and economics of the digital age.

This latest study seems to show that over the past few years, the FCC has either already, or is planning to reverse what can be considered to be the most significant bi-partisan deregulatory achievements of the past two decades. Problems result from the fact that communications networks are considered as long-lived entities meaning that costs are recovered over long periods of time. The study finds that “a lack of stability in the FCC’s policies combined with a pro-regulatory bias at the agency create an uncertainty that is especially insidious" to give sufficient incentives for broadband investments.”

It appears that proponents of a bygone era that saw monopolies as a way of life and want regulations for broadband Internet access services have campaigned relentlessly for a reinstatement of the old rules. Currently, the market reality presents a very different picture. It shows that there has been dramatic growth in large bandwidth-consuming content and applications (primarily video) in recent years and that significant investment is needed to meet the needs of this increased consumption.

Broadband providers continue to invest a large amount of capital to build out capacity to meet the challenge. However, certain large content and application providers, also known as edge providers, whose traffic is uniquely driving this bandwidth demand and who have always paid for ingress and egress to broadband networks, increasingly seek to avoid having to pay for their share of broadband network costs.

Co-author of the study and Phoenix Center chief economist, Dr. George S. Ford, wrote "While the FCC's leadership claims to recognize the need for regulatory certainty to encourage investment in broadband infrastructure, the agency's actions are instead entirely unpredictable. If promoting certainty is its goal, then the agency is a spectacular failure."

Lawrence J. Spiwak, who in addition to also being a co-author of the study is Phoenix Center’s president, echoes Dr. Ford by saying "While there has always been an element of politicization to regulation, there can be no doubt that over the past several years -- evidenced particularly with the current net neutrality debate -- we have hit a new nadir. Good policy should be made after a careful review of the facts, law and economics at issue rather than upon the naked political pressure of opinionated 'clicktivism.'"

For those like me who are unfamiliar with the word, nadir is defined as the lowest point in the fortunes of a person or organization. It is the direction pointing directly below a particular location. Is this what we can expect from the FCC as service providers attempt to deploy faster and more reliable networks? Will we, as the consumer, be faced with higher rates based on a politician’s say so? The “certainty” that the FCC had been working to establish, will it still exist and will politicization reduce broadband investment?

 


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