Our Co-Chairman Bruce Mehlman has a piece in Investor’s Business Daily on Verizon, the FCC, and the current business data services discussion. An excerpt:
Trade association INCOMPAS, which represents competitive local exchange carriers (CLECs), and Verizon have been working together to “negotiate” a deal with the Federal Communications Commission. Although the terms may make perfect sense for them, they’re bad for the actual deployment and adoption of broadband infrastructure and, namely, the future of business data services (BDS).
Some are currently trying to sell this as a “compromise” plan — it’s not; a compromise typically requires there to be opposite sides at the table. Verizon is in the midst of transformation where it has sold off much of its wired telephone footprint across the nation in recent years and, as a result, now finds itself more and more a buyer of BDS in much of the country.
Good for Verizon if it thinks that this transformation benefits its company and shareholders, and quite logical for the company to lobby regulators on its new position. The FCC, however, retains the duty to investigate what’s really at stake in the purported “compromise” and to spot and call a shell game when they see one. Unsurprisingly, it all comes down to price and profit.
Over at The Street, our own Bruce Mehlman writes about the election and what it could mean for tech and investment. An excerpt:
[I]n this world of technological convergence, in which companies offering Internet, video, and traditional communications services are merging (some quite literally and others through expanding their business lines), investors should know that there are some critical decisions on the horizon regarding interference in these markets or light-touch regulation. Those decisions will impact whether companies invest robustly, whether distributors of content will have the right incentives to continue innovation in that space, and many other issues. Watch the returns on Election Night – but also watch those critical appointments in regulatory agencies over the coming year to get a fuller flavor of the impact of government regulation on markets.
The light-touch regulatory framework of the 1996 Telecom Act set the stage for extensive internet network investment and innovation. To examine how this investment and innovation have empowered Americans to shape presidential races, we hosted “From Netscape to Snapchat: Politics in the Age of Broadband” at the Rock and Roll Hall of Fame in Cleveland during the Republican National Convention (RNC). You can watch a video of the event below.
Over at The Street, our own Bruce Mehlman has an op-ed on Verizon’s recent about face when it comes to investment and facilities-based competition, particularly in the business data services market. An excerpt:
Since 2003 — a virtual eternity in the fast-paced world of telecom — Verizon has staunchly advocated for investment, deployment of fiber, and facilities-based competition. Verizon’s once-visionary leadership coined the phrase ‘new wires, new rules/old wires, old rules’ used by the FCC to create pro-fiber investment policies that helped spur the deployment of its modern high-speed broadband network. The “Fi” in FiOS, a central part of Verizon’s corporate strategy and broadband buildouts — stands for fiber, after all.
Yet Verizon now trumpets a deal with the competitive local exchange carrier (CLEC) trade association INCOMPAS that favors price regulation in the BDS market. Why the sudden change? Some might suggest that Verizon’s proposed mergers currently pending before the FCC and other government agencies might be the reason why the company is now simply driving 55 past the speed trap giving a friendly wave to the regulatory cops.
But there’s another likely reason: In a highly regulated environment, it can be tempting to let regulators determine outcomes in markets rather than doing the hard work of competition.
The smart folks at Light Reading have kicked off a four-part series analyzing the Cable industry’s performance and opportunities in serving the business market. If you’re the type who enjoys wonking out on telecommunications complexities, you’ll want to check the series out.
The first part of the series, “How Cable Means Business About Business,” examines cable company entry into the business data services market. The data it presents makes clear how companies such as Comcast and Time Warner (now part of Charter Communications) have made significant inroads in the commercial communications service market. As this chart from the article shows, Comcast’s business market strategy appears focused on medium-sized business customers.
And Time Warner Cable (now owned by Charter Communications) has seen year over year revenue growth in the commercial service market:
So what’s the big deal about these charts? Why is cable’s growth in commercial services relevant? It’s important because the Federal Communications Commission (FCC) is poised to impose new price regulations on existing antiquated copper-based networks as well as new fiber facilities and services that serve business customers. The FCC justifies this regulatory overreach on the perceived lack of competition in the marketplace.
In doing so, however, the Commission appears to be turning a blind eye to the true competitive nature of the commercial services market. As we’ve noted before, in crafting new price regulation, the FCC is relying on dated, incomplete and deeply flawed data. The FCC’s market data is not only nearly three years old, it also fails to capture the robust entry and success of cable in this market.
Imposing heavy handed price regulation on this rapidly changing market could create long-term incentives that ultimately lower capital investment, lessen facilities-based competition, and harm consumer for businesses in urban and rural markets across the nation.
Broadband network investment vital to 21st century economic growth and job development should not be put at risk, it’s not too late for the FCC to pause and consider these new data points before rushing to judgment.
Yesterday, IIA held the event From Netscape to Snapchat: Politics in the Age of Broadband at the Republican National Convention. It was a great discussion, and featured new research from our friends at Pew on social media and this year’s election.
You can learn more about the discussion here. And here’s some of the coverage the discussion received in the press.
Sara Fagen, a technology strategist and former advisor to George W. Bush, said Clinton’s technology advantage will matter if the election is close. She cited Trump’s naming of Mike Pence as his running mate via Twitter as an example of a blown opportunity. Both Barack Obama in 2008 and Mitt Romney in 2012 used their announcements to enlarge their lists of supporters.
Fagen predicted that the next major step in using technology to target voters would use data to find where and when to target them, using their location and beliefs to determine the type and content of ads. For example, certain women might hear education-related ads on the radio when they drop their kids off at school, then get another message at their work computers, followed by a mobile ad when they are most likely to be looking at their phones.
Bruce Mehlman, founding co-chairman of the IIA, said the increasing popularity of online news sources affirms the validity of federal communications sector policy that has allowed the industry to thrive. “We really need to maintain these light-touch, pro-investment policies,” he said.
— John Curran, TR Daily
During an event in Cleveland Monday discussing the various candidates’ digital campaigns — less than two miles from the 2016 Republican National Convention — Deep Root Analytics’ Sara Fagen said Trump, who famously discounted analytics at the start of his campaign, has missed major opportunities that could make the 10 or 20,000-vote difference in key battleground states.
Tune in Monday, July 18 starting at 12 pm EST for IIA’s From Netscape to Snapchat: Politics in the Age of Broadband, live from the Rock and Roll Hall of Fame in Cleveland. As part of the discussion, Pew Research Center will present its latest data on campaign communications.
During the 1996 re-election campaign, presidential candidates primarily reached voters through traditional media – one-way communication. Americans were limited in how they could make their voices heard: writing or faxing a letter, picking up the phone, or visiting with candidates in-person. That same year, the light-touch regulatory framework of the 1996 Telecom Act set the stage for extensive network investment and innovation that created many new channels for two-way and multi-way communication between presidential campaigns and voters, empowering Americans to shape the presidential race.
The discussion will explore these questions and more:
• How has the way that presidential campaigns reach American voters evolved since 1996?
• How are Americans interacting with presidential campaigns today using social media and the web?
• Can social media have a truly significant impact on the outcome of a presidential race?
• Has the political process been effectively democratized by broadband?
Featured speakers include:
Amy Mitchell (opening remarks)
Director of Journalism Research, Pew Research Center
Senior Counsel, Google
Co-Founder, Deep Root Analytics
Partner, FleishmanHillard’s specialty brand DDC
Co-Founder, Echelon Insights
Chairman and Founder, Engage
Bruce Mehlman (moderator)
Founding Co-Chairman, Internet Innovation Alliance
The Federal Communications Commission has been extremely active as of late, and this rush to regulate has not been without its headaches. Case in point: The Commission’s proceeding in relation to Special Access services (Business Data Services (BDS).
Specifically, the recent release of peer reviewed responses to a third-party economist study commissioned by the FCC for the Special Access proceeding. Inexplicably, the FCC decided to release these peer reviewed responses on the very day that comments were due on the FCC’s Special Access Notice of Proposed Rulemaking, even though these responses were in the agency’s possession since late April.
This surprise last minute dump of critical information is bad enough, but what makes the headache a potential migraine for interested parties is the fact that the peer review responses make clear that the data the FCC relied upon to propose new regulations on business services is flawed. As Hal Singer notes on his website:
As revealed in the peer review, the flaws in the underlying economic work that undergirds the proposed regulation of BDS (previously called “special access” services) are potentially fatal, rendering the analysis useless as the basis for the agency’s proposed regulations.
The fact that the FCC’s data is so severely flawed — even useless — is critical information that should have been made known to commenting parties before they submitted their comments. The FCC’s decision to sit on this data until after comments were filed represents a breach of trust between regulators and the public. Moving forward to adopt new regulations in light of now useless data would compound that breach and signal a potential political motive to achieve a certain policy goal. Here’s Singer again:
In seeming disregard to these significant criticisms, the FCC presses forward with its radical proposal, which would subject both telcos (incumbents) and facilities-based entrants (cable companies) to price controls. None of the economic statements released by the staff this week credibly addresses the critical errors reviewed here. Peer review is great in theory, but if doesn’t cause the Commission to alter its approach, then what good is it?
The simple solution for this mess is for the FCC to immediately extend the reply comment deadline for their BDS NPRM. This would give all interested parties and Congress an opportunity to review and provide input on the peer review study and the related economic statements. After all, billions in broadband investment dollars are potentially at stake. Let’s hope the FCC is listening.
Maxime Bernier, one of the candidates for leader of the Conservative Party of Canada, has just given a speech in which he set out ways to achieve real competition in the telecom sector. And one of the things he proposes is actually to phase out the role of the Canadian Radio-television and Telecommunications Commission (CRTC) as telecom regulator.
Bernier is a telecom and regulatory expert. He was Minister for Industry in Stephen Harper’s Conservative government and led the deregulation of local telephone markets after cable companies and wireless had transformed the telecom landscape. In short, Bernier recognized that there was “obviously more and more competition,” and he acted on it. In the face of opposition both from those who favored continued regulation and the Canadian regulator itself, the market was deregulated and competition flourished.
So why is Bernier so anxious to act now? It all goes back to his time in government. Ten years ago, he had set out a Policy Direction to the CRTC, which instructed, in his words, “the CRTC to rely on market forces to the maximum extent feasible within the scope of the Telecommunications Act” as a “solution” to its “control freak mindset.”
Back to old ways
What happened? “I, and many others at the time thought that it would force the CRTC to change its ways, to become more flexible and adapt to the new competitive reality. We were wrong. The CRTC seemed to take the Policy Direction seriously for a few years. And then it reverted back to its old ways.”
And from this, Bernier draws a conclusion about regulation and regulators: “Those whose task it is to regulate this industry tend to be behind the curve. They don’t want to let go of their regulatory control. Meanwhile, the industry has actually moved on, with new innovations.” That’s exactly right. And it applies just as much here as there.
Now if the CRTC can behave this way in a parliamentary system, in which it is supposed to follow the directions of Parliament, imagine the vast discretion our own Federal Communications Commission (FCC) has in a system where it is an independent regulatory body.
Implementing policies that ignore the marketplace
Why should Americans care? Because the issues that Bernier cites as examples of a regulatory mindset are the same ones we face here, notably with broadband, wireless and the nature of competition itself. In each case, the regulator opted for policies that ignored the marketplace, put its hand on the scale and favored policies that restrict investment. In auctions, restrictions on bidding intended to dictate market outcomes led to misallocation and under-utilization (as some of the spectrum sold in 2007 for public safety is still not being used and other parts took seven years to finally see service after sale in secondary markets).
So whether it’s broadband, wireless auctions or the nature of competition itself, the issues are similar on both sides of the 49th parallel. Regulators too often seek to ignore marketplace realities. In the U.S., we are witnessing it today with the FCC’s heavy-handed proposed regulations in areas such as special access, privacy and the video marketplace, among others.
Regulators only want to protect their own power
What Bernier writes of the CRTC could equally be said of the FCC: “As the industry evolves, the CRTC finds new reasons to continue to regulate it, in order to justify its existence. In doing so, it is not protecting consumers, it is only protecting its own power. The telecom industry is a mature and competitive industry, and it should be treated as such. It’s not a playground for bureaucrats.”
Both Americans and Canadians are better off with greater access to modern, fast telecommunications services, when the regulator lets the market work, encourages real competition, and investment, and keeps its hand off the scale. In fact, again quoting Bernier: “Interventionist policies that are meant to bring more competition actually do the opposite. Competitive markets don’t need government intervention to work. They only need to be free.”
This week the FCC allowed parties to release some aggregate data in the broadband market collected as part of the ongoing special access proceeding. And this data, even though partial, confirms what I and others have been saying all along: virtually all businesses have access to real, facilities-based competition today. And to the degree that some individual businesses don’t have that access today, it’s because the current beneficiaries of special access regulation have an incentive not to invest to connect their business customers to the closest competitive fiber networks that are readily available in the market.
In all, 95% of Census blocks where demand for special access exists have competitive facilities available. And those Census blocks include 99% of all businesses in the country.
With grades like these, let’s give an A+ to the competitive providers that are bringing modern fiber to American businesses. This definitely includes cable companies that are rapidly expanding their services to businesses of all sizes.
On the other hand, it’s clear from the data that the CLECs have customers in many office buildings that must continue to rely on antiquated copper facilities and their slow data speeds because their CLEC provider refuses to build out fiber connections to nearby fiber networks. Apparently, it’s easier to call for FCC action than it is to build out networks even 1000 feet to compete with the competitive carriers.
As US Telecom notes, the calls for more FCC intervention are “a matter of convenience, not competition.” But a business strategy of rent-seeking-rather-than-investing is not evidence of market failure. It’s evidence instead of regulatory failure. Because so long as the FCC’s special access policies serve to protect the business models of CLECs, who decline to invest, then why invest? Why spend shareholders’ or investors’ money when the government forces others to subsidize you? Nice work if you can get it, but it does nothing to promote innovation or, for that matter, competition. Government-enabled competition isn’t really competition.
But now that at long last we have some data publicly available, the right policy is even more clear: There’s simply no reason for the FCC to intervene in this market even more than it already has. The decision by some companies not to invest in the future should not be a basis for increased regulation.
A new paper from Anna-Maria Kovacs, Visiting Senior Policy Scholar at the Georgetown Center for Business and Public Policy, takes a deep dive into the current state of “special access” services, particularly whether there is a case for re-regulation. You can download a copy of the full report here, but here’s some findings from the executive summary to chew over:
Both the traditional U.S. CLECs and the cable companies who have entered the business broadband market are in good financial health and are generating higher free cash flow than the wireline segments of the largest ILECs. The CLECs and cable operators also have higher stock valuations, indicating that investors expect them to grow revenues and cash flow more rapidly.
Traditional CLECs have focused on the business market exclusively and built out only in areas where high-density makes construction-cost relatively low and attainable-revenue relatively high. In other words, they build only where they can expect penetration levels high enough to ensure high free cashflow. The CLECs’ metro fiber networks have brought them into or close to most buildings that house potential business broadband customers.
The data provided publicly by U.S. CLECs and cable operators confirms the few facts that have so far emerged from the FCC’s special access data collection, i.e. that there is extensive facilities-based competition in the business broadband market.
The enterprise market’s migration from legacy TDM facilities to Ethernet over fiber or coax facilities provides the CLECs and cable operators with the opportunity to compete on equal terms with the ILECs in the fast-growing portion of the market, while decimating the legacy revenues of the ILECs.
On Wednesday, IIA Founding Co-Chair Bruce Mehlman moderated a panel at the TIA Spring Policy Summit, titled “Special Access Re-Regulation.” The robust discussion explored the FCC’s regulation of the business data services market. Below are a handful of highlights:
Berge Ayvazian, Wireless 20/20: We have seen significant competition in the special access field between companies. This competition has shaped the underlying infrastructure on which wireless exists. We must take advantage of this opportunity to apply what we have learned in the last 10 years to allow the market to evolve around the competition already happening in the marketplace. In most markets, the quality of service being delivered by an ILEC and a CLEC is the same. We need to change the way we impose regulations on the business broadband market.
Patrick Brogan, USTelecom: Competition policy has been evolving since 1996 in the business broadband marketplace. The special access market has been competitive in telecom for a very long time. The guiding policy over the past fifteen years has been to encourage facilities-based competition and this should continue to be our goal.
Fred Campbell, Tech Knowledge: I find it difficult to believe that price regulation is needed when we have seen healthy competition. During the net neutrality proceeding, Chairman Wheeler was certain that there would be no price regulation. Business services is where competition started. Consumers do not need price regulation. Something is not right about this proceeding.
Hal Singer, PPI: If you push prices down from competitive levels you will see inefficiencies at all levels. If you are going to seize someone’s property, though, you are smart to wait until they have upgraded their network. You do not want to join the old copper network; you want them to already be upgraded to fiber. Prices are not at monopoly levels. By 2014, 42% of commercial buildings were outfitted with fiber. In 2009, it was just 23%. If you step in now and impose price regulations you could do some bad things. The notion that people are competing on a non-level playing field does not make sense.
Ayvazian: We all agree there is no basis on which to introduce price regulations.
Campbell: In my view, price regulation is the last option and worst possible way to address market issues.
Singer: Before Gigi Sohn was at the FCC, she was at Public Knowledge. One of Public Knowledge’s ultimate objectives is increased regulation and unbundling. There are a lot of forces at play here that are pushing them towards the CLEC agenda.
Brogan: There is a group in the CLEC industry that benefits from price regulation and increased access to network facilities. It is easier to lease these from the incumbents than it is to build their own facilities. Campbell: Their complaint is that, to get a certain discount, you need to commit to a 7-year term. I do not see how that is inherently problematic when facilities must be built. These contracts are long-term for a reason.
Brogan: I would continue to not regulate carrier Ethernet and rationalize regulation. Do not lower prices. This will discourage investment. That is the source of innovation within the broadband industry. Facilities-based competition is more self-sustaining.
Campbell: We need to stop moving to the left of Europe on communications policy. Many of the same consumer groups supporting price unbundling loved to point to Europe as an example of how broadband policy in the United States policy should move. In 2013, the EU’s version of the FCC drafted a lengthy report with data on developments in the EU markets and concluded that investment in the EU is lower due to unbundling. The reason is that unbundling discourages investment. If an entity has regulated access at government regulated rates, they have profit without the risk of losing investment dollars. Their conclusion was that, beyond where cable was, there was no increased investment. Now Chairman Wheeler wants to do it anyways.
Singer: If you want to maximize broadband deployment, we should be free of regulations.
Campbell: Chairman Wheler uses the word “competition” a lot, but when he uses it, he means something completely different than I do when I say competition.
Singer: When you say competition three times, it is static and not dynamic. Chairman Wheeler’s competition does not mean anything.
Campbell: Our FCC just makes up competition in market segments as if it is a new thing. Europe has imposed standards on how to impose these regulations. This has given them enormous power to do unhealthy things for a viable and competitive communications market.
Singer: We are not going to get to a Communications Act rewrite until we solve the net neutrality problem. The idea is to figure out a way to give the FCC authority to regulate allegations of discrimination on a case-by-case basis. Republicans should go forward on a broadband subsidy so we do not have to raise taxes on the back of broadband users.
Campbell: If we want to talk about politicized decision-making, let’s look at net neutrality. One of the arguments raised in favor of Title II regulations were the number of comments received in favor of it. It did not matter who these were from, but simply the volume of responses. The question we all asked was the relevance of each of these comments. There are arguments about the FCC’s political form of decision-making.
Yesterday, our Co-Chairman Bruce Mehlman had an op-ed published in The Street on Sprint wanting it both ways when it comes to special access services. An excerpt:
Every year American employers spend far more money than they should on a blizzard of government filings. Some are mandatory like tax returns and Securities and Exchange Commission (SEC) filings. Some are critical for public safety or record-keeping like prescription drug studies or the Census. Some are purely voluntary—like engaging in federal regulatory agency proceedings.
However, problems arise when these filings fail to add up. For instance, what if a company tells the SEC one thing to try to win favor on Wall Street but then tells another government agency something different to get special regulatory treatment? Which one should the government believe? For that matter, what should investors believe?
Sprint provides an excellent example of this type of behavior, offering investors a bullish spin for growth based on innovation while pleading with policy makers to pity its relative weakness through ongoing regulatory intervention. In the age of heightened transparency, however, policy makers should see through the smoke and recognize the competitive market that truly is. And, unfortunately for Sprint and its investors, the story it’s telling regulators is much closer to the truth.
Earlier today, the Phoenix Center released a new paper titled “The Road to Nowhere: Regulatory Implications of the FCC’s Special Access Data Request.” Penned by Chief Economist George S. Ford, the paper predicts that the FCC’s data collection efforts will not serve those who want more regulations on Special Access services. In fact, Ford argues that the “FCC’s Special Access data will likely show that regulation is unnecessary in many geographic areas and already adequate, if not too strict, in others.”
Ford also reports that comments so far received at the Commission aren’t helping the process either. As he writes:
The first round of comments based on the data have been submitted to the Commission, but the comments and reports aren’t terribly helpful to the general public; the Commission, perhaps concerned the data would not support its pro-regulatory agenda, has not only restricted access to the data but those with access are required to redact from their comments and reports even the most summary of statistics indicating the extent of competition and other facts.
The commission’s new investigation into special access rates gives short shrift to these aggressive competitors and relies on an old vision of the marketplace to protect the business models of a few companies, even as it is supposed to be promoting deployment of ever-faster broadband. Those hardworking crews you see from the road, and that rumbling sound you can feel, represent investment taking place. Competition works and is working in the real world—but it apparently remains unseen and unfelt at the FCC.
You can download the Phoenix Center’s “The Road to Nowhere: Regulatory Implications of the FCC’s Special Access Data Request” at their website.
As the nation turns its eyes to political primary seasons, one of the things voters most dislike is politicians saying one thing to one group and then saying something else to others.
All politicians inevitably pander, and the smart voter needs to review the full body of a candidate’s comments to appreciate where they really stand.
The same challenge often exists with companies. For businesses also try to tell one audience, such as government regulators, one thing and Wall Street another.
Take Sprint. Sprint tells Wall Street it is incredibly well-positioned to thrive in a competitive marketplace, while begging the government to maintain regulations protecting and advantaging it against other competitors.
Start with what Sprint is telling the government: last September, Sprint told the FCC that it needs regulated access (“special access”) to business data lines: “Every one of these sites will require additional backhaul and Sprint and other competitors will depend on both TDM and Ethernet special access more than ever to be able to compete.” Sprint said essentially the same thing in 2013 in the same docket (yes, the “05” in the FCC’s proceeding refers to “2005” – this one has been going on for an absurd length of time).
But to Wall Street, Sprint sings a very different tune: it claims to save money by not relying on FCC-mandated business data circuits and writes, in its filings to the SEC, that it is purchasing alternative, more modern Ethernet circuits in the competitive marketplace. Sprint said that every year from 2011 to 2015, repeating the message that “We are also modifying our existing backhaul architecture to enable increased capacity to our network at a lower cost by utilizing Ethernet as opposed to our existing time division multiplexing (TDM) technology.”
Sprint said that it’s using Ethernet to save money; it’s apparently applying the technology for use as wireless backhaul to reduce its network costs – an effort that BITG analyst Walter Piecyk estimated “could save between $600 million to $1.2 billion a year of network expense.”
Sprint has been offering Ethernet to businesses since 2007. It’s spending money to modernize its own network, selling newer lines to customers, and talking up its technology to both Wall Street and customers. Those are all great things to do in a competitive market (and, in fact, hard evidence of a competitive market), but Sprint still wants the government to keep its hand on the scale.
So Sprint wants to sell service on those newer lines to business data customers, use others for wireless backhaul to save money, and still force its competitors to pay for regulated “special access” lines that rely on outdated technology.
There’s no reason the FCC should fall for such double speak. Sprint does not need special access regulation; it’s merely using this as a tool to increase its competitors’ costs while reducing its own.
Wall Street accepts (and has for several years) that Sprint has made the investments (a 53% increase in 2012, for instance) to make it a competitor in a competitive Ethernet market. It doesn’t need “special access” regulations or special protection from the refs (in this case, the FCC).
Like sophisticated voters, government regulators should consider all of the candidates’ statements, not merely those pandering to a single audience.
In 1973, the Edgar Winter Group scored a Top 20 hit with “Free Ride.” In 2016, Competitive Local Exchange Carriers (CLECs) are trying to score a free ride from the FCC via heavy regulation of special access rates.
While the CLECs like to claim there is a monopoly in the business broadband market, investment numbers say otherwise. Hundreds of billions are being invested in broadband networks, and all that money is not coming from CLECs. No wonder they want the FCC to impose heavy regulations on special access. The CLEC business model is to rely on the regulatory hammer to give them access to networks others have built, and as networks across the nation are upgraded to run on all-IP — and businesses require ever-faster broadband — the CLECs are quickly finding their business model is on thin ice — with spring around the corner.
Still, they continue to bend the FCC’s ear, which is why I continue to write about special access. It’s also why the organization US Telecom has launched a new initiative called “Innovate With Us” to remind policymakers that the broadband market in America is thriving across the board, and in order to keep the good times — and investment dollars — rolling, sensible regulations need to be in place. Or, as US Telecom succinctly put it in the intro to the initiative:
[T]he FCC should champion pro-investment policies that work for business customers, not specific companies, and look beyond yesterday’s technologies toward the networks of the future.
“Competition” is one of those words that make policymakers tingle. And yet, time and time again, private industry finds itself wrestling with regulations that not only harm competition but — in the most extreme cases — actively benefit one party over another.
Case in point: wireline broadband competition. Providers have invested billions to expand the reach and speed of their networks, and yet recent actions taken by the FCC are threatening to stifle ongoing investment. But don’t just take my word for it. Check out this latest study from the American Consumer Institute titled “Concentration by Regulation: How the FCC’s Imposition of Asymmetric Regulations Are Hindering Wireline Broadband Competition in America.”
Yes, that title is quite the mouthful (as most study titles are), and to be honest, unless you’re someone who enjoys diving into studies (with charts) on regulations, investment, and the economy, you might find the report’s 18 pages a bit of a slog. But those of us who do read through ACI’s study will find a convincing — and rather damning — case that the FCC is mistepping rather badly as it continues to amass more and more power over broadband. For example, here’s what the report has to say about one of the biggest regulatory marks the Commission made in 2015:
Title II regulations are preserving and maintaining duplicative and costly copper networks. That cost is an impediment to fiber deployment that keeps ILECs more reliant on older copper-based DSL technologies. Instead of the FCC relieving non-dominant ILECs of Title II regulations in more competitive markets, the FCC has recently chosen to make broadband service providers subject to Title II regulations.
Unless there is action soon, the shift in concentration is likely to be permanent. A decade ago, the rollback of asymmetric regulations permitted modest rebound in broadband services for ILECs, because there was brisk growth in subscribers. Today, because the broadband market is so widespread, growing slower and more mature, asymmetric broadband regulation will likely have longer term consequences that could permanently displace and weaken wireline competition. Even if a rebound is possible, ILECs will face a major cost to win back customers. Regulations are costly and delays in lifting these regulations will be even more costly.
Translation: Old regulations that effect some providers and not others are forcing companies like Verizon and AT&T to invest billions in the copper networks of old. Meanwhile, other providers don’t face such regulatory roadblocks, even as they aim to invest in the very same thing legacy providers are investing in — fiber-backed, high-speed broadband networks. Not exactly the spirit of competition, is it?
The ACI study isn’t all doom and gloom for America’s communications infrastructure, though, for the group has thoughtfully included a three bullet points that can help level the playing field:
• Policymakers need to end Title II regulations for all providers.
• There needs to be less emphasis on regulation of wholesale services. Less regulation will encourage more facility-based investments, which will lead to the natural development of a healthy, wholesale market; and
• If regulators truly believe that some regulation of wholesale services is necessary – and that may be the case in some rural markets – then regulators need to apply these regulations on a symmetrical and competitively neutral basis.
In short, get rid of the bad regulations, be careful when imposing new ones, and make sure everyone is playing under the same rules. Wise words, but the question is: Will the FCC listen?
In an op-ed originally published by The Street, our Co-Chairman Bruce Mehlman warns that the FCC’s is taking the wrong approach when it comes to encouraging broadband competition. An excerpt:
Federal Communications Commission (FCC) regulators, purportedly eager to promote competition, keep stifling the investment needed to advance it meaningfully. Case in point, the Commission recently opened a tariff investigation on “special access” rates in the business data services market. For many observers, this political inquiry is unwarranted by the facts on the ground, driven instead by companies whose business models are dependent on government protection for “rent-seeking,” or ongoing access to the networks that others built.
In this bonus edition of Let’s Get Nerdy, our Co-Chairman Bruce Mehlman breaks down how the business special access marketplace has changed since the 1990s, and discusses whether FCC special access rules are still necessary.
In today’s installments, our Co-Chairman Bruce Mehlman continues to focus on Special Access and regulations. Here he talks about what the U.S. can learn from a decade of empirical data collected by the European Union on wholesale access regulation.
Rounding out the discussion, Mehlman talks about the likely impacts of the FCC requiring that IP services replacing copper be offered to CLECs at wholesale rates.
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Internet Innovation Alliance reserves the right to change the terms, conditions, and notices under which the Internet Innovation Alliance Web Site is offered, including but not limited to the charges associated with the use of the Internet Innovation Alliance Web Site.
LINKS TO THIRD PARTY SITES
The Internet Innovation Alliance Web Site may contain links to other Web Sites (“Linked Sites”). The Linked Sites are not under the control of Internet Innovation Alliance and Internet Innovation Alliance is not responsible for the contents of any Linked Site, including without limitation any link contained in a Linked Site, or any changes or updates to a Linked Site. Internet Innovation Alliance is not responsible for webcasting or any other form of transmission received from any Linked Site. Internet Innovation Alliance is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement by Internet Innovation Alliance of the site or any association with its operators.
NO UNLAWFUL OR PROHIBITED USE
As a condition of your use of the Internet Innovation Alliance Web Site, you warrant to Internet Innovation Alliance that you will not use the Internet Innovation Alliance Web Site for any purpose that is unlawful or prohibited by these terms, conditions, and notices. You may not use the Internet Innovation Alliance Web Site in any manner which could damage, disable, overburden, or impair the Internet Innovation Alliance Web Site or interfere with any other party’s use and enjoyment of the Internet Innovation Alliance Web Site. You may not obtain or attempt to obtain any materials or information through any means not intentionally made available or provided for through the Internet Innovation Alliance Web Sites.
USE OF COMMUNICATION SERVICES
The Internet Innovation Alliance Web Site may contain bulletin board services, chat areas, news groups, forums, communities, personal web pages, calendars, and/or other message or communication facilities designed to enable you to communicate with the public at large or with a group (collectively, “Communication Services”), you agree to use the Communication Services only to post, send and receive messages and material that are proper and related to the particular Communication Service. By way of example, and not as a limitation, you agree that when using a Communication Service, you will not:
Defame, abuse, harass, stalk, threaten or otherwise violate the legal rights (such as rights of privacy and publicity) of others.
Publish, post, upload, distribute or disseminate any inappropriate, profane, defamatory, infringing, obscene, indecent or unlawful topic, name, material or information.
Upload files that contain software or other material protected by intellectual property laws (or by rights of privacy of publicity) unless you own or control the rights thereto or have received all necessary consents.
Upload files that contain viruses, corrupted files, or any other similar software or programs that may damage the operation of another’s computer.
Advertise or offer to sell or buy any goods or services for any business purpose, unless such Communication Service specifically allows such messages.
Conduct or forward surveys, contests, pyramid schemes or chain letters.
Download any file posted by another user of a Communication Service that you know, or reasonably should know, cannot be legally distributed in such manner.
Falsify or delete any author attributions, legal or other proper notices or proprietary designations or labels of the origin or source of software or other material contained in a file that is uploaded.
Restrict or inhibit any other user from using and enjoying the Communication Services.
Violate any code of conduct or other guidelines which may be applicable for any particular Communication Service.
Harvest or otherwise collect information about others, including e-mail addresses, without their consent.
Violate any applicable laws or regulations.
Internet Innovation Alliance has no obligation to monitor the Communication Services. However, Internet Innovation Alliance reserves the right to review materials posted to a Communication Service and to remove any materials in its sole discretion. Internet Innovation Alliance reserves the right to terminate your access to any or all of the Communication Services at any time without notice for any reason whatsoever.
Internet Innovation Alliance reserves the right at all times to disclose any information as necessary to satisfy any applicable law, regulation, legal process or governmental request, or to edit, refuse to post or to remove any information or materials, in whole or in part, in Internet Innovation Alliance’s sole discretion.
Always use caution when giving out any personally identifying information about yourself or your children in any Communication Service. Internet Innovation Alliance does not control or endorse the content, messages or information found in any Communication Service and, therefore, Internet Innovation Alliance specifically disclaims any liability with regard to the Communication Services and any actions resulting from your participation in any Communication Service. Managers and hosts are not authorized Internet Innovation Alliance spokespersons, and their views do not necessarily reflect those of Internet Innovation Alliance.
Materials uploaded to a Communication Service may be subject to posted limitations on usage, reproduction and/or dissemination. You are responsible for adhering to such limitations if you download the materials.
MATERIALS PROVIDED TO Internet Innovation Alliance OR POSTED AT ANY Internet Innovation Alliance WEB SITE
Internet Innovation Alliance does not claim ownership of the materials you provide to Internet Innovation Alliance (including feedback and suggestions) or post, upload, input or submit to any Internet Innovation Alliance Web Site or its associated services (collectively “Submissions”). However, by posting, uploading, inputting, providing or submitting your Submission you are granting Internet Innovation Alliance, its affiliated companies and necessary sublicensees permission to use your Submission in connection with the operation of their Internet businesses including, without limitation, the rights to: copy, distribute, transmit, publicly display, publicly perform, reproduce, edit, translate and reformat your Submission; and to publish your name in connection with your Submission.
No compensation will be paid with respect to the use of your Submission, as provided herein. Internet Innovation Alliance is under no obligation to post or use any Submission you may provide and may remove any Submission at any time in Internet Innovation Alliance’s sole discretion.
By posting, uploading, inputting, providing or submitting your Submission you warrant and represent that you own or otherwise control all of the rights to your Submission as described in this section including, without limitation, all the rights necessary for you to provide, post, upload, input or submit the Submissions.
THE INFORMATION, SOFTWARE, PRODUCTS, AND SERVICES INCLUDED IN OR AVAILABLE THROUGH THE Internet Innovation Alliance WEB SITE MAY INCLUDE INACCURACIES OR TYPOGRAPHICAL ERRORS. CHANGES ARE PERIODICALLY ADDED TO THE INFORMATION HEREIN. Internet Innovation Alliance AND/OR ITS SUPPLIERS MAY MAKE IMPROVEMENTS AND/OR CHANGES IN THE Internet Innovation Alliance WEB SITE AT ANY TIME. ADVICE RECEIVED VIA THE Internet Innovation Alliance WEB SITE SHOULD NOT BE RELIED UPON FOR PERSONAL, MEDICAL, LEGAL OR FINANCIAL DECISIONS AND YOU SHOULD CONSULT AN APPROPRIATE PROFESSIONAL FOR SPECIFIC ADVICE TAILORED TO YOUR SITUATION.
Internet Innovation Alliance AND/OR ITS SUPPLIERS MAKE NO REPRESENTATIONS ABOUT THE SUITABILITY, RELIABILITY, AVAILABILITY, TIMELINESS, AND ACCURACY OF THE INFORMATION, SOFTWARE, PRODUCTS, SERVICES AND RELATED GRAPHICS CONTAINED ON THE Internet Innovation Alliance WEB SITE FOR ANY PURPOSE. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, ALL SUCH INFORMATION, SOFTWARE, PRODUCTS, SERVICES AND RELATED GRAPHICS ARE PROVIDED “AS IS” WITHOUT WARRANTY OR CONDITION OF ANY KIND. Internet Innovation Alliance AND/OR ITS SUPPLIERS HEREBY DISCLAIM ALL WARRANTIES AND CONDITIONS WITH REGARD TO THIS INFORMATION, SOFTWARE, PRODUCTS, SERVICES AND RELATED GRAPHICS, INCLUDING ALL IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NON-INFRINGEMENT.
Internet Innovation Alliance reserves the right, in its sole discretion, to terminate your access to the Internet Innovation Alliance Web Site and the related services or any portion thereof at any time, without notice. GENERAL To the maximum extent permitted by law, this agreement is governed by the laws of the State of Washington, U.S.A. and you hereby consent to the exclusive jurisdiction and venue of courts in King County, Washington, U.S.A. in all disputes arising out of or relating to the use of the Internet Innovation Alliance Web Site. Use of the Internet Innovation Alliance Web Site is unauthorized in any jurisdiction that does not give effect to all provisions of these terms and conditions, including without limitation this paragraph. You agree that no joint venture, partnership, employment, or agency relationship exists between you and Internet Innovation Alliance as a result of this agreement or use of the Internet Innovation Alliance Web Site. Internet Innovation Alliance’s performance of this agreement is subject to existing laws and legal process, and nothing contained in this agreement is in derogation of Internet Innovation Alliance’s right to comply with governmental, court and law enforcement requests or requirements relating to your use of the Internet Innovation Alliance Web Site or information provided to or gathered by Internet Innovation Alliance with respect to such use. If any part of this agreement is determined to be invalid or unenforceable pursuant to applicable law including, but not limited to, the warranty disclaimers and liability limitations set forth above, then the invalid or unenforceable provision will be deemed superseded by a valid, enforceable provision that most closely matches the intent of the original provision and the remainder of the agreement shall continue in effect. Unless otherwise specified herein, this agreement constitutes the entire agreement between the user and Internet Innovation Alliance with respect to the Internet Innovation Alliance Web Site and it supersedes all prior or contemporaneous communications and proposals, whether electronic, oral or written, between the user and Internet Innovation Alliance with respect to the Internet Innovation Alliance Web Site. A printed version of this agreement and of any notice given in electronic form shall be admissible in judicial or administrative proceedings based upon or relating to this agreement to the same extent an d subject to the same conditions as other business documents and records originally generated and maintained in printed form. It is the express wish to the parties that this agreement and all related documents be drawn up in English.
COPYRIGHT AND TRADEMARK NOTICES:
All contents of the Internet Innovation Alliance Web Site are: and/or its suppliers. All rights reserved.
The names of actual companies and products mentioned herein may be the trademarks of their respective owners.
The example companies, organizations, products, people and events depicted herein are fictitious. No association with any real company, organization, product, person, or event is intended or should be inferred.
Any rights not expressly granted herein are reserved.
NOTICES AND PROCEDURE FOR MAKING CLAIMS OF COPYRIGHT INFRINGEMENT
Pursuant to Title 17, United States Code, Section 512(c)(2), notifications of claimed copyright infringement under United States copyright law should be sent to Service Provider’s Designated Agent. ALL INQUIRIES NOT RELEVANT TO THE FOLLOWING PROCEDURE WILL RECEIVE NO RESPONSE. See Notice and Procedure for Making Claims of Copyright Infringement.