Monday, October 31, 2005 - The Progress & Freedom Foundation Blog

Capitulatory Regulation: Half-Baked Regulatory Ideas Have Their Heyday

The fact that the FCC approved the mergers today at all is a signal regulatory/political achievment. That the Chairman had to buy these approvals at a non-trivial price with non-germane regulations is unfortunate. That the FCC again is exacting "voluntary" concessions shows that the art of the regulatory stick-up is alive and well. If this agency continues superimposing its industrial policy whims on the communications sector, America's competitive broadband future will continue to be a bumpy one.

As for the conditions:

Randy put it much more nicely and fully, but what in the world does "naked DSL" have to do with the competitive effects of the VZ-MCI and AT&T-SBC mergers?

The answer, of course, is nothing. If there were any competition policy harms to be redressed here, it was in the in-region, enterprise markets where MCI and AT&T have overlapping facilities with their respective merger partners.

But naked DSL as a retail requirement? It is simply the irrelevant intuition about possible harm from bundling. Furthermore, as the companies' promise to the FCC that it can monitor the rates of the naked versus clothed DSL product shows, rate regulation and its attendant distortions are never too far away.

Speaking of which, what does net neutrality have anything to do with the mergers? Again, nothing. The combination of AT&T into SBC and MIC into Verizon does nothing to increase the risk of consumer-harmful blocking of Internet connectivity. The FCC imposes the condition because it can, and then only for a term that has no basis in law or policy -- but only as the outcome of negotiation.

Finally, for all the talk about harm from regulatory asymmetry, these merger approvals sure do create a bunch of them. I don't think I would want to be negotiation the Adelphia mergers right now.

No wonder the DC Circuit overturns the FCC so often for its policy promiscuity. Lucky for the Commission, all these conditions are voluntary and thus not appealable.

posted by Ray Gifford @ 12:42 PM | The FCC