Thursday, June 9, 2005 - The Progress & Freedom Foundation Blog

Video Over Fiber: Rhetorical Ironies and Inconsistencies

In the rhetoric of communications policy debates, the irony of telcos being criticized for (potentially) bringing another video service option to consumers goes without saying. The promise of fiber-based video offerings has generated a backlash of pleas that such offerings be subjected -- before they are barely launched -- to various fees, network build-out requirements and other so-called "social" obligations. As stated elsewhere, these pleas arise from several potential motives, only some of which may be self-interested. An equally-important point, however, may be that these pleas illustrate inconsistencies -- which are ultimately unsustainable -- in the rhetoric and related policy judgments associated with previously distinct services that are converging over IP networks.

The divergence between the rhetoric surrounding broadband and that surrounding video services is perhaps most striking. As cable companies and others invested billions to upgrade networks to provide broadband Internet access, few in the industry or among policymakers argued strenuously that regulation would do anything but retard such investment. This seems especially true of government rate-setting and other forms of "economic" regulation. Luckily, companies and policymakers don't appear to be pushing to impose such regulation on either broadband or video service.

But the rhetoric surrounding each of these services diverges with respect to other types of regulation. The FCC took pains (subject to review by the Supreme Court in Brand X) to classify broadband Internet access as an "information service" under the Communications Act, so as to promote deployment in a minimally-regulated environment. And although the FCC opened long-delayed proceedings on whether to impose a few requirements on broadband (e.g., wiretapping for law enforcement), most doubt the agency has much explicit authority to impose such requirements on broadband information services. The FCC's implicit authority to regulate these services is even sketchier.

With respect to regulatory fees, the FCC's treatment of broadband has been similar. Despite the tremendous growth in broadband, the agency has not rushed to force cable modem providers and other non-telcos to pay into the "universal service" fund, even though telco broadband providers already do. Notwithstanding any benefits associated with expanding the contribution base for universal service, calls to require all broadband providers to pay into the fund often have been less than vigorous, with some arguing that such requirements would amount to objectionable "Internet taxation."

In addition, broadband providers generally continue to escape specific network build-out requirements. Rather, they blossom in the relative freedom of the statute's less onerous demand that deployment remain "reasonable and timely" under section 706.

Fiber-based video services, in contrast, have been threatened -- at least rhetorically -- with more burdensome requirements. In the name of "level playing fields," for example, some companies have proposed subjecting these new entrants to the full panoply of federal and local regulation imposed on cable companies under Title VI of the Act. And although some proponents of this approach have wisely shifted emphasis toward allowing the growing number of video service providers to flourish without regulation, the damage already may have been done; having assumed momentarily that regulation was needed to achieve the goals of Title VI, the debate may never return fully to the threshold question whether market forces alone could satisfy these same goals. This sad fact could encompass both Title VI's allowance for specific local build-out requirements and its provision for local regulatory (i.e., franchise) fees.

Of course, some of the disparities in how broadband and fiber-based video services are discussed in policy circles merely reflect inconsistencies in the current regulatory scheme. The Communications Act's balkanized treatment of services formerly provided over disparate networks has yielded distortions, uncertainties and other shortcomings in a world where services increasingly can be provided over any network infrastructure. These shortcomings, in turn, have inspired efforts to reform the Act comprehensively.

But meaningful reform will require more than skillful draftsmanship. It also will require a consistent acknowledgement that regulation -- whatever its benefits -- may frustrate investment and innovation, whether the service is broadband Internet access, video service or some communications service yet to be invented.

posted by Kyle Dixon @ 8:28 PM | Broadband , Cable , Communications , Innovation , Internet , Universal Service