Tuesday, June 28, 2005 - The Progress & Freedom Foundation Blog

Broadband Post-Brand X: The Long and Winding Road

As I have stated repeatedly, the FCC needed to win the Brand X litigation to carry out its plan to minimize regulation and thereby bring consumers the benefits of investment and innovation in competing broadband networks. Based on his reaction to Monday's Supreme Court decision affirming the FCC, Chairman Martin appears to agree. But even as we (or at least some of us) celebrate Monday's decision as a victory for consumers, it is important to remember that, for the FCC, this is only a first step down a long and winding road.

To complete the regulatory framework for cable modem service, for example, the FCC will likely need to resurrect the proceeding it shelved when the 9th Circuit attempted to sidestep the deference to agencies that the Supreme Court has now re-established. That proceeding has asked whether cable operators must obtain an additional franchise, pay additional franchise fees, or comply with a variety of customer service, consumer protection and privacy obligations with respect to cable modem service even when it is classified as an "information service." The FCC also might, perhaps in other proceedings, consider subjecting cable modem providers to other obligations, involving such issues as access by persons with disabilities and wiretapping for law enforcement.

More next steps will be required to free telephone companies from broadband regulation. The Supreme Court's decision relied heavily on the fact that cable modem service combines high-speed transmission with data processing functions analogous to those involved in dial-up Internet access. The Court (like the FCC) said little about whether cable modem providers should be allowed to provide transmission and data processing as an integrated service.

By contrast, the FCC's Computer Inquiry rules currently force telcos to provide transmission and data processing separately. Thus, to classify DSL and other telco broadband offerings as "information services," the FCC will not be able to rely on what telcos currently do but must engage in a more complex analysis of why rules on the books should be eliminated. Moreover, questions could arise regarding whether the FCC can eliminate these rules based on its generic authority to modify rules given changed circumstances, or whether it must satisfy the more demanding test laid out in its statutory mandate to "forbear" from unnecessary regulation.

Once the FCC clears these hurdles, of course, telco broadband offerings classified as "information services" would advance to the same stage at which cable operators find themselves today; the FCC still would have to decide whether to impose disabilities access or other obligations on these services. The FCC also will have to decide what to do with the other proceedings it initiated to examine whether and how to regulate telcos if they volunteer to offer high-speed transmission separately from data processing. And with respect to all of these proceedings, the FCC likely will need to refresh records that have gone stale in the last few years.

Thus, whether the FCC actually delivers a minimally regulated environment in which broadband can flourish depends on what the FCC does next, and there is a lot of "next" to do.

In that regard, the FCC must be mindful not only of complex and evolving technology and market factors, but also the vagaries of its own authority to regulate "information services." As I have stated previously, there are limits to the FCC's "ancillary" authority to impose rules on these services, given the Act does not impose many specific requirements on these services expressly. Although Monday's decision evidences the Court's willingness to defer to the FCC regarding how to classify broadband, the Court said nothing about whether the FCC has authority to apply and enforce rules on broadband. Resolving that question will require courts to examine specific rules, which as I indicated above have not been proposed or fully commented on yet.

As for Ray's question whether Monday's decision deepens a hazard that agencies will "hang back" to allow courts to resolve difficult questions, I'd say no. In light of Monday's ruling, courts of appeals will have at least two options in deciding legal questions the FCC has not yet resolved. They can decide these questions based on ambiguous statutory language knowing that Congress ultimately assigned that task to the FCC, which thereafter may proffer a different interpretation. Alternatively, courts of appeals can determine that the statutory language is clear and thereby force the FCC, as a practical matter, to accept the court's interpretation or take the issue up with the Supreme Court. This latter threat that the FCC's "expert agency" views could be made irrelevant by a court should serve as at least as strong a spur to the FCC as it faced previously.

In any event, the Brand X decision likely will not become the main factor in setting the speed with which the FCC resolves legal and policy questions regarding broadband and Internet-related services. The reality is that these are novel and varied services (e.g., broadband and Internet voice services may differ considerably in how they are technically provided or how they are offered to customers) that don't fit easily into the current statutory classifications. In trying to make these square pegs fit into round holes, the FCC is faced not only with the task of balancing complex and conflicting policy goals, but also with the reality that all parties to its proceedings (as governed by the Administrative Procedure Act) will use those proceedings to advantage themselves and to disadvantage their rivals.

In sum, the main reason the FCC takes so long is that its job is a difficult one -- an explanation that is as simple as it is unsatisfying. But absent fundamental reform of what the FCC is charged to do and how (procedurally) it accomplishes those tasks, the road to establishing ground rules for broadband competition will, indeed, be long and winding.

posted by Kyle Dixon @ 3:50 PM | Broadband , Broadband , Cable , Communications , Innovation , Internet , Net Neutrality , The FCC , Wireline