To put it mildly, the most contentious issue in the working group involved the survival of any state rate regulation. The current draft retains to states the ability to retain a residential basic local rate, with a process whereby that rate can be petitioned away.

On the broader question of price controls, if it had its druthers, the group would abolish all rate regulation. However, a concession to the longstanding universal service tradition of communications regulation leads toward retaining the basic service rate on a grandfathered basis. Under this model then there would be no rebalancing of the rate, but just a "rough justice" grandfathering of the various state rates. This would mean that companies would remove all tariffs, cease all rate filings and cost studies, leaving only local exchange maps and a single basic res service tariff in place (in the lingo, the 1FR) at the state level. All other rates would be deregulated and there could be no imputation of the 1FR rate into any packages.

It is very fashionable to argue against the role of state agency regulation, but the realities of the effectiveness of many state agencies and the notable shortcomings of the FCC make telecom a more complex case. Not to mention, the best uses of preemption--including by the FCC (think equipment regulation)--are when no regulation is appropriate. But the Title I model of DACA envisions a competition policy standard that will require some institution to develop and apply rules that will often turn on fact specific inquiries.

As a matter of institutional design, the Regulatory Framework that DACA proposes takes on the first important question--why should agencies and not courts administer telecommunications competition policy? (On the continuing role for an agency in managing telecommunications policy, you can see my explanation (developed with Jon Nuechterlein, my Digital Crossroads co-author) here.) That a critically important question, but its answer begged a second one: could the FCC do it all itself?

For a host of reasons, some of which Ray ably noted, we concluded that the FCC could not implement competition policy all by itself, even though an integrated federal framework was critical. In taking our best stab at a reasonable institutional strategy, we looked for ways to have both the feds and states play an effective checking function against one another as well as to enable the states to provide valuable institutional support for implementing a federal regulatory regime. After all, if there will continue to be regulation of interconnection and other competitively essential wholesale support (see other debates forthcoming), some agency has to do it. And for those who followed the FCC's one effort to do that in the case of Virginia, which opted out of implementing the Telecom Act, it's hard to imagine the FCC doing 51 of those.

For Preemption:
The preemption model has enjoyed a large measure of success in deregulating network industries. Preemption of state regulation under a uniform deregulatory federal scheme resulted in large consumer welfare gains in other network industries: airlines, trucking, railroads and natural gas production. In addition, preemption allowed parochial interests and public choice pressures inherent in state regulatory schemes to be overcome. [This is not to deny that federal agencies can also be a public choice wonderland. It is just more difficult to capture them.] Preemption allowed the interests of consumers to triumph over the interests of regulated industries, which often act as the fiercest defenders of state regulation because the regulation can be turned to their advantage.

The Federal/State Working Group's Report issued today. Like with the framework, consensus on some points proved easier than others. In the former category, the dual federalism model of the first 60+ years of communications rejected. The group's controversial questions centered then around the extent of preemption, and specifically preemption of all state rate regulation.

Some initial questions then:

1. Why not complete preemption of state authority; that is, why not cut the states out altogether?

2. Why leave any residual rates in place like the group does, even if it is a basic rate subject to attack under the framework's "unfair competition" standard?

3. How, exactly, would a delegation of competition policy authority to a given state work? Wouldn't there be inconsistent outcomes and procedures?

4. Counter to question 1, why not allow states more initial autonomy to experiment with different sorts of rate regulation and competition policy arrangements?

I am sure there are other questions and controversies that my fellow working group members can detail.

For starters, let me offer some initial questions that I have found myself answering since the report came out:

1. Why is there a separate interconnection standard? Why can't it just be left to a general "unfair competition" standard?

2. The Internet backbone interconnects without any special interconnection mandate through privately negotiated agreements, does the DACA interconnection standard inhibit this private deal-making?

3. Does your model allow the FCC to continue its practice of rate-setting -- particularly as to interconnection -- and thus continue the time-worn hazards of rent-seeking and industrial policy shenanigans?

4. Does this Model allow for regulation of the higher layers of the Internet protocol stack, thus isn't it more regulatory?

5. Why do you use the phrase "public networks" in your draft statutory language? Doesn't that create problems in defining what is, and isn't subject to your general standard of "unfair competition"?

6. What is wrong with the IP Migration model?

I have some tentative -- and even some good! -- answers to many of these questions, but I'll turn it over to my fellow working group members first. Specifically, I look forward to the Gattuso/Speta/Shelanski discussion on the interconnection standard, and the Sicker disquisition on the limits of the IP Migration model. Plus, it is my hope we get some cross-pollinization between working groups, as folks cross-comment on their colleagues' work.

When Doug Sicker (note: picture in link not representative of current hair length) recommended that we beging a wiki or a blog to continue the discussion of our DACA Regulatory Framework Working Group Report, the reaction at PFF was something like: "Oh no, you guys aren't going start another blog are you?"

Well, we are.

But this one will be a bit different. First, we opted for a blog over a wiki. Not only did we already have Movable Type ready to go, we thought that the term "blog" incited slightly less giggling than "wiki." Given these are serious issues, we opted for the lower giggle factor. Second, this will be a group blog, with all participants of the various Working Groups able to post. We will also, for the time being, enable the comment feature here, with the hope that we get some virtuous feedback loops going. We reserve the right to shut comments off in case we are overwhelmed by comment spam, or if the comments take on an uncivil or unhelpful tone.

The reason for the blog is to further explain, discuss, elucidate and generally argue about the provisions in the respective Working Group reports. Since we released the initial framework report, I have found myself in many very similar discussions explaining why the group made the choices it did; where the close calls were; and where disagreements remain. Also, I have found that the FTC model the Working Group endorsed is quite foreign to the understanding of communications lawyers. Accordingly, I hope that the various members of the Working Group can explain how we anticipate our recommended model to work.

Finally, we entitled our Working Group Report "Release 1.0". We take seriously that our proposal is a first draft, and through the workshop a few weeks ago, as well as the discussion on this blog, we hope to refine and make a better Digital Age Communications Act.

With that, let me declare this blog open for posting.