IPcentral Weblog
  The DACA Blog
  Institutions
     
  Tanks
     
  Blogs
     
  Mags
     

Monday, February 22, 2010

 
Running for the Hills: A View from Wall Street on Reclassification of Broadband Internet as Title II Service
(previous | next)
 

At a recent policy discussion luncheon in Washington, Craig Moffett, Senior Analyst, Bernstein Research, was asked how Wall Street would view a movement by the Federal Communications Commission to "re-classify" broadband Internet access services as "telecommunications services" subject to the full panoply of Title II common carrier regulation. His response: "investors would run for the hills." Such an action, Moffett explained, would be very destabilizing for the industry. Yet, that is exactly what several groups have asked the FCC to do in the context of developing its National Broadband Plan. The stated reason for this action is that reclassification from the lightly regulated "information service" category to the heavily regulated "telecommunications service" category "would expand the range of opportunities for more aggressive regulatory steps geared to promote widespread deployment and adoption of advanced telecommunications services." In other words, we can aggressively regulate our way to network investment and deployment.

I have previously written on this topic and noted that the purpose of regulation is to curtail companies from taking actions that they might otherwise take to gain some benefit, such as increase the return on the capital they have invested in their networks. Aggressive regulation will necessarily adversely impact network operator's future desire to continue to invest in their networks, just as it will adversely affect the desire of their investors to continue to invest in the communications infrastructure sector. As Dr. Larry Darby has observed, the concern is not that heavy handed regulation will completely stop network investment, but rather that "such rules will suppress investment that otherwise would be made, and that the differences might be substantial." In contrast, regulatory stability combined with actions based on empirical evidence and sound legal analysis that do not blow with the winds of the day is what is required to support the substantial long-term investments necessary to fund network industries like communications.

Whatever the merits or short-comings of the FCC's four separate decisions to classify all broadband Internet access services (cable modem, wireline Internet, broadband over powerline, and wireless Internet services) as information services, subject only to its limited Title I "ancillary jurisdiction," it may be too late in the day to go back, like SNL's Emily Latella, and say to the courts: "Never mind!" These decisions were made upon adequate factual records, consistent with the manner in which the services are provided, the wording of the statutory definitions, and the de-regulatory thrust of the provisions added to the Communications Act by the Telecommunications Act of 1996. The cable modem classification was upheld by the U.S. Supreme Court in the Brand X decision as a reasonable interpretation of the statute. There is no evidence that the manner of provisioning these services to the public is different today and the statutory definitions and policies under-girding these decisions are unchanged as well. A sector subject to a regulator using the logic of Humpty Dumpty would hardly be attractive to investors.

The FCC's National Broadband Plan team has previously placed a price tag for providing universal broadband service to all residents of the country at anywhere from $20 to $350 billion for a single network, depending on the speed of the connection delivered and other variables; double that--$700 billion--to support two networks if the competitive provision is deemed necessary. The American Recovery and Reinvestment Act budgeted $7.2 billion to support broadband deployment and adoption efforts. Private companies have invested hundreds of billions of dollars in the past decade to upgrade and expand their distribution networks and for the provision of Internet services and applications, and will need to continue to invest on a massive scale to meet the growing bandwidth demands of the future. The Government Accountability Office has recognized that we must continue to rely largely on private investment to fund network expansion and upgrades to achieve our broadband goals.

It is axiomatic, therefore, that a proposal that would send investors "running for the hills" should be categorically excluded from consideration as part of both the NBP and from the execution of the FCC's general statutory responsibilities, which include encouraging the deployment of advanced telecommunications capabilities such as high speed Internet service. A destabilized communications network sector will simply be unable to deliver the "100 Squared" vision recently articulated by the FCC's Chairman. The FCC would violate, not further, its statutory duties if its actions cause private capital to flee the communications infrastructure sector. At a time of record federal deficits, the chance that the federal government will cover a $350 billion shortfall, let alone the $700 billion shortfall, or that the universal service fund can do so, is somewhere between "Slim" and "None," and Slim just walked out of the building.

posted by Barbara Esbin @ 8:42 PM | Broadband , Communications , The FCC

Share |

Link to this Entry | Printer-Friendly | Email a Comment | Post a Comment(0)

Comments

Post a Comment:





 
Blog Main
RSS Feed  
Recent Posts
  EFF-PFF Amicus Brief in Schwarzenegger v. EMA Supreme Court Videogame Violence Case
New OECD Study Finds That Improved IPR Protections Benefit Developing Countries
Hubris, Cowardice, File-sharing, and TechDirt
iPhones, DRM, and Doom-Mongers
"Rogue Archivist" Carl Malamud On How to Fix Gov2.0
Coping with Information Overload: Thoughts on Hamlet's BlackBerry by William Powers
How Many Times Has Michael "Dr. Doom" Copps Forecast an Internet Apocalypse?
Google / Verizon Proposal May Be Important Compromise, But Regulatory Trajectory Concerns Many
Two Schools of Internet Pessimism
GAO: Wireless Prices Plummeting; Public Knowledge: We Must Regulate!
Archives by Month
  September 2010
August 2010
July 2010
June 2010
  - (see all)
Archives by Topic
  - A La Carte
- Add category
- Advertising & Marketing
- Antitrust & Competition Policy
- Appleplectics
- Books & Book Reviews
- Broadband
- Cable
- Campaign Finance Law
- Capitalism
- Capitol Hill
- China
- Commons
- Communications
- Copyright
- Cutting the Video Cord
- Cyber-Security
- DACA
- Digital Americas
- Digital Europe
- Digital Europe 2006
- Digital TV
- E-commerce
- e-Government & Transparency
- Economics
- Education
- Electricity
- Energy
- Events
- Exaflood
- Free Speech
- Gambling
- General
- Generic Rant
- Global Innovation
- Googlephobia
- Googlephobia
- Human Capital
- Innovation
- Intermediary Deputization & Section 230
- Internet
- Internet Governance
- Internet TV
- Interoperability
- IP
- Local Franchising
- Mass Media
- Media Regulation
- Monetary Policy
- Municipal Ownership
- Net Neutrality
- Neutrality
- Non-PFF Podcasts
- Ongoing Series
- Online Safety & Parental Controls
- Open Source
- PFF
- PFF Podcasts
- Philosophy / Cyber-Libertarianism
- Privacy
- Privacy Solutions
- Regulation
- Search
- Security
- Software
- Space
- Spectrum
- Sports
- State Policy
- Supreme Court
- Taxes
- The FCC
- The FTC
- The News Frontier
- Think Tanks
- Trade
- Trademark
- Universal Service
- Video Games & Virtual Worlds
- VoIP
- What We're Reading
- Wireless
- Wireline
Archives by Author
PFF Blogosphere Archives
We welcome comments by email - look for a link to the author's email address in the byline of each post. Please let us know if we may publish your remarks.
 










The Progress & Freedom Foundation