Decompetition Decompetition Decompetition

Scott Cleland | Chairman, NetCompetition

The FCC’s new professed mantra is “competition competition competition.”

However, the FCC appears to be pursuing a de facto policy of decompetition rather than competition.

Decompetition is regulation that undermines competition in order to justify more regulation.

How could this perverse outcome happen?

It’s what one gets when one combines an obsolete communications law and regulators nostalgic for the regulatory power of a bygone era.

The FCC is increasingly acting like a 20th century regulator searching for relevance in a 21st century marketplace.

The 1934 Communications Act created the FCC. The 1996 Telecom Act changed national communications policy from monopoly utility regulation to competition policy.

Communications competition policy has been wildly successful in the U.S., resulting in the most robust facilities-based broadband competition in the world and $1.2 trillion in private Internet infrastructure investment.

Earlier this year, an appeals court ruled that the FCC did not have the authority to regulate broadband “information services” like a monopoly, common-carrier utility. However the court did recognize that the FCC does have some general regulatory authority under Section 706 of the 1996 Telecom Act to promote advanced telecommunications capability.

Ironically, for many years the FCC legally assumed that this same Section 706 provision did not confer the regulatory authority that they have now been granted by the appeals court.

The perverse problem with the FCC’s current complete dependency on the 1996 Telecom Act’s Section 706 provision for its broadband authority is that it now always must find broadband deployment and competition insufficient in order for the authority to remain usable by the FCC to regulate.

The FCC now needs competition to fail for the FCC to succeed.

This outcome also directly contravenes Congress’ stated purpose of the 1996 Act: “To promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies.”

Consider the evidence of this perverse outcome.

To effectively extend its regulatory authority for years, the FCC is proposing to redefine broadband from a baseline speed threshold of 4 Mbps to 10 Mbps and potentially as much as 25 Mbps, which would have the result of ruling that there is dramatically less broadband competition than today, simply by deeming it so by unilaterally “moving the goalpost.”

This is the regulatory equivalent of changing the rules of a football game so that after competitors have marched 97 yards down the field quickly without any penalties, the referee mid-game moves the goal-line 150 yards further, or even potentially 525 yards further, before the referee may rule it a touchdown.

The FCC also has signaled that as competition referee it will not recognize America’s four national LTE wireless broadband providers — Verizon, AT&T, Sprint and T-Mobile — as real broadband competitors, because the FCC believes wireless broadband is not a “full substitute” to fixed broadband service.

To reach this self-serving and almost comical conclusion, the FCC has to ignore how 200 million Americans routinely use smartphones and tablets on the move to do essentially most every function that they can do on their fixed broadband at home.

This is the regulatory equivalent of the FCC referee of a football game arbitrarily ruling mid-game that the team that has fielded a smaller more mobile team doesn’t belong on the field competing with a larger less mobile team — even when 200 million consumer fans have long paid to watch this game.

What a perverse definition of competition when the FCC expects competitors to field the exact same type of players and strategy as their opponents. Isn’t the essence of being a competitor finding a different way, strategy or team with which to compete?

The FCC may be professing a mantra of “competition, competition, competition,” but their signaled decisions suggest a de facto FCC policy of “decompetition, decompetition, decompetition” — regulation that undermines competition in order to justify more regulation.

The best evidence that the Communications Act is obsolete, and in urgent need of modernization, is that the FCC has lost sight of Congress’ competition purpose in the 1996 Telecom Act — “to promote competition and reduce regulation” — and effectively reversed it to promote regulation and reduce competition.

American consumers deserve a competition policy aligned with their interests, not the FCC’s.

Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, a research consultancy for Fortune 500 companies, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests.

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