Thursday, May 5, 2005 - The Progress & Freedom Foundation Blog

CA Consumer Bill of Rights: It's Baaaaack . . .

This week's reincarnation of a "consumer bill of rights" in California dramatically illustrates the need to clarify the appropriate role for state communications regulators as part of overall telecom reform. But clarifying state and federal regulators' respective roles must go beyond considering who regulates; we also must consider why they regulate. Specifically, we must consider whether state regulation should attempt only to further basic social goals, or whether states should be allowed to engage in broader economic regulation.

As Adam Peters detailed in his essay kicking off PFF's telecom reform project, the emergence of digital communications has begun to present various challenges -- shown in stark relief in the Internet voice context. Several of these challenges ask policymakers to decide whether and how regulators in different jurisdictions can cooperate effectively enough to exploit the relative strengths of each jurisdiction and to encourage investment and innovation in these critical technologies.

Just as importantly, however, these challenges involve fundamental questions of regulatory philosophy. The 1996 Telecommunications Act clarified that the chief mechanism for maximizing the benefits of communications to consumers is the deployment of new technologies and services in markets that should be less and less regulated. But the Act hardly endorses the flash cut to laissez-faire that many companies would prefer. This has led to a "fearful" debate among policymakers. Some fear that uncoordinated action among regulators in multiple jurisdictions will generate burdensome layers of rules that instead will stifle investment and innovation, particularly with respect the deployment or upgrade of digital networks. Others fear that an excess of free-market thinking will result in real harm to competition and to consumers, who are not yet weaned from the paternalism that has characterized their traditional relationship to "public utilities."

Some helpful consensus has developed in this debate; participants have expressed, to greater or lesser degrees, a desire to promote investment and innovation in these services by protecting them from unnecessary regulation. Participants diverge, however, over what regulation is "unnecessary." Some argue that any state rules should be limited to imposing "social" obligations (e.g., access to emergency services, universal service, access by persons with disabilities) that fall short of comprehensive regulation of rates, terms and conditions. These obligations often are imposed based on an assumption that the benefits pursued are "public goods" that government must provide in light of "market failure." Others argue that states should be allowed also to impose "economic" obligations governing general terms and conditions of service. Such regulation could manifest as retail price and other controls or as wholesale requirements regarding interconnection, unbundling and the like.

In the context of federal-state relations, this debate over regulatory philosophy boils down to a central question: should states be limited to administering social obligations, or should they also be allowed to engage in economic regulation? The California consumer bill of rights reflects the fact that this question has not yet been answered satisfactorily.

The bulk of the "rights" in the California measure, of course, easily fall into the category of social regulation. Among others, the bill includes provisions relating to consumer fraud, disclosure of "911" availability and information regarding the terms and specifications of service, as well as various aspects of privacy and personal security protection.

Several other provisions of the bill, however, contemplate state economic regulation, such as rights to access Internet content and to purchase broadband services without purchasing local phone service from the same company. There are no mandates attached to these provisions at present, and the bill of rights does not itself expand state jurisdiction regarding interstate services such as broadband Internet access. But these omissions may just beg (for now) the question of what the state would do if these "rights" are violated. And certainly, states adopting similar measures may not include such omissions at all.

There can be disagreement regarding whether state measures such as the California bill of rights are good or bad. But there can be no disagreement that the next round of telecom reform must establish clearer roles for states in regulating communications. And figuring that out must go beyond asking "what states are good for" to address core questions of what kinds of rules -- social or economic -- should apply to emerging technologies, no matter which jurisdiction administers them.

posted by Kyle Dixon @ 5:47 PM | Broadband , Capitol Hill , Communications , Net Neutrality , VoIP