Friday, January 6, 2006 - The Progress & Freedom Foundation Blog

Of Puppies and Private Carriage

Like puppies chasing our tails, we telecom wonks can't resist chasing parties' arguments over whether the FCC should reconsider its decision to deregulate DSL and other phone company broadband offerings. Some of this results from the almost-metaphysical allure of revisiting the circular definition of "common carriage"; a company is a common carrier if it holds itself out as a common carrier, even if government requires it to act like a common carrier in the first place.

But competitive companies' arguments are intriguing for another reason: in certain respects they may be as risky for competitors as they are for incumbent phone companies.

The incumbents helped initiate this skirmish by petitioning [TRDaily subscription required] to extend the FCC's decision to deregulate standalone broadband transmission services, such as the asynchronous transfer mode (ATM) and frame relay services that phone companies sell primarily to large business users. Not surprisingly, newer entrant phone companies objected, reminding the Commission that they rely on similar services to compete with incumbents. Deregulating these services, they argue, would deny them critical inputs and thereby deny consumers the benefits of competition.

One way competitors appear to incur risks is in arguing that, because incumbents have chosen to provide DSL as bare transmission in some cases (i.e., without incorporating their Internet access service), incumbents must do so in all cases. Even if competitors persuaded the FCC to endorse this "all or nothing" rationale, however, they seem unlikely to convince the FCC to deny incumbents some ability to provide broadband on a non-common carrier or "private carriage" basis. Indeed, stripping incumbents of the right to negotiate private arrangements for broadband would run counter to the Commission's longstanding effort to promote broadband by minimizing regulation of those services. So persuading the FCC that incumbents must provide only standalone transmission offerings if they provide any might have the perverse effect of encouraging incumbents -- with the FCC's blessing -- to withdraw those offerings, even where incumbents had marketed them voluntarily.

Even riskier may be competitors' interpretation of the common carriage definition itself. The NARUC line of cases stands broadly for the proposition that a company can be subject to common carrier regulation if either (1) it provides service indiscriminately to all potential customers or (2) the government decides that the company is required to provide service in that manner for public policy reasons. Obviously, this reasoning is somewhat circular, but competitors seem bent on downgrading this circularity to a one-way ratchet. Specifically, they appear to argue that incumbents must keep providing standalone broadband transmission, even after they are no longer required to do so. Here again, this flies in the face of the Commission's broadband policy. It also seems dismissive of amendments to the Communications Act (sections 10 and 706) that insist that the FCC eliminate common carrier and other forms of regulation to promote broadband and whenever such rules are unnecessary. Given these factors, and the courts' tendency (at least in the Supreme Court) to defer to the FCC's judgment in these matters, these aspects of competitors' arguments may invite a bad ruling not just from the FCC, but also from the courts.

Only time will tell whether these risks pan out, or whether mine are the myopic worries of a telecom wonk. In any case, competitors will no doubt find it funnier, in retrospect, if I have been chasing my tail than if they have been peeing on themselves.

posted by Kyle Dixon @ 11:42 AM | Broadband , Communications