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Tuesday, September 20, 2005

The Metaphysics of Communications Reform
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Back in January 2004, as VoIP was catching on big-time, I wrote a piece for CNET entitled "The Metaphysics of VoIP." I predicted, correctly I think, that much of the coming debate over how VoIP should be regulated under the existing legal regime "would be downright metaphysical." And I pointed out that the dictionary definition of metaphysical means:(1) "of or relating to the transcendent or to the reality beyond what is perceptible to the senses"; (2) "supernatural"; or (3) "highly abstract or abstruse." Of course, in the regulatory world, not only philosophers, but lawyers, find good paying work on metaphysical playgrounds.

So, in another CNET piece, this one published in October 2004 and entitled "Calling for Regulatory Overall Bit by Bit," I called for a new communications law framework that would not be based on what I called "highly abstruse techno-functional constructs." I said such a regime would lead to continuing disputes about the boundaries of service categories that determine regulatory consequences. And I concluded: "What we need is a new market-oriented regulatory model, not a replacement regime based on another set of techno-functional definitions."

Regretfully, the discussion draft released by the House Commerce Committee staff late last week is a framework built on regulatory techno-functional definitions--classifications of BITS providers, VoIP providers, and broadband video providers with attendant regulatory consequences.

The serious difficulty with this approach from a political economy and public choice standpoint is that, on the one hand it lends itself to legislators and regulators fiddling with the techno-functional constructs in ways that allow them to shape the market to their own ends, however well-intentioned. And, on the other hand, it leads those who might be benefitted or disadvantaged by manipulating the interpretation of such techno-functional definititons to invest in doing so.

For an example of the first hand, look at the broadband video provisions which require the provision of certain types of (not-yet-offered) integrated Internet functionalities in order to qualify for streamlined franchising treatment. Do the legislators (or regulators who will implement the provisions and, inevitably, the courts who will ultimately interpret them) really know what consumers will demand in the marketplace and or technological capabilities might evolve in the future, absent regulatory constraints, to meet such demand?

Or, to take on the second hand the market participants who seek to qualify for treatment as a BITS provider, or disqualify their competitors. Will the dispute over whether a new protocol is a "successor protocol" of the TCP/IP protocol really be anything other than a metaphysical food fight? And one with likely ongoing uncertainty and attendant long running litigation that will impede marketplace development? (Anyone reading this who remembers the FCC's decade-long struggle to define protocol processing for purposes of drawing the lines between "enhanced" and "basic" services please raise your hand!)

I have great admiration for those who have put in many long hours to produce the discussion draft. It is not easy making sausage on hilltops, especially with a lot of chefs in the kitchen. By virtue of the nature of the process, I believe, however, that the production of the discussion draft can be a constructive step in helping to focus the coming legislative debate. There are elements of the draft that have a deregulatory thrust that are commendable, putting aside for the moment ambiguities in the language that call into question whether that thrust would, in fact, be realized.

I am sure that if one assumes that the discussion draft model, which is what we called the IP Migration model in our DACA regulatory framework group, is the only basis for moving forward with communications legislation, there are ways to improve on the draft language to diminish the likelihood of regulation that is unnecessary and unwise in the current communications environment. To some extent the draft takes what one might call a "clean version" of an IP-Migration model and then reimposes some of the old legacy regulation on top ot it. See, for example, the Section 104 Net Neutrality provision governing "access to bits" or the entry registration requirements throughout. By definition, it is very difficult for any model based on technology distinctions to establish a deregulatory firewall in today's fast-changing technological environment. But it is my intent to offer a few such drafting suggestions that move in the direction of tightening up in another post, assuming for the sake of argument the current draft. I bet some of my colleagues might as well.

But, for now, what I suggest is this: Compared to the techno-functional approach taken in the discussion draft, the market-oriented model ("FTC model") that the DACA Regulatory Framework Proposal released in June presents an attractive, non-techno-functional alternative that deserves to receive renewed attention. It is likely that the reform debate will continue well into next year. There is time enough to reflect and make sure we get the overall fundamental framework right.

posted by Randolph May @ 12:30 PM | Capitol Hill

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