Competition, Neutrality, and Other Words That Don’t Mean Price Regulation
At Thursday’s meeting, by a 3-2 party line vote, the FCC adopted a Further Notice of Proposed Rulemaking that seeks comment on a new rate regulation regime for business data services. In the lead up to that vote, NCTA made clear that we object to the proposal because it radically departs from four decades of bipartisan policy by proposing to regulate the rates of new facilities-based entrants. That such an approach would deter investment and competition seems obvious, but apparently not to this FCC. At the meeting and the subsequent press conference, Chairman Wheeler defended his proposal on the grounds that he was merely trying to “level the playing field” in a “technology neutral” manner so as to better promote “competition.” To recycle a movie quote recently used by Commissioner Pai, “You keep using that word. I do not think it means what you think it means.” Competition: noun, the act of competing; the rivalry offered by a competitor To be clear, in the context of business data services, cable operators are the competition that the Chairman says he is trying to promote. They are attracting millions of customers all over the country by offering new IP-based services at lower prices. And cable operators of all sizes are hoping to grow this segment of the business by investing in new facilities to compete for new customers and new locations. To suggest that areas where cable operators are delivering real benefits to real businesses are somehow not competitive eliminates all meaning from the word. Furthermore, we have yet to hear a coherent explanation how regulating the rates charged by a new entrant could ever serve to promote competition. In the real world, what CFO would approve an investment in new facilities or expansion to a new geographic area if prices will be set by FCC bureaucrats? The Chairman repeatedly mentioned the importance of business data services in connection with wireless backhaul, but not once did he explain who he thinks is going to build new backhaul facilities if the FCC is setting the rates. The position that NCTA has advocated with respect to business data services is that the Commission should “level the playing field” by relieving the incumbent provider of rate regulation when a competitor enters the marketplace. In contrast with certain other participants in this proceeding, we are not looking to handicap our competitors through rate regulation. Eliminating rate regulation as competition grows has been the Commission’s approach to leveling the playing field for decades and nothing Chairman Wheeler said on Thursday explains why a departure from that policy is warranted here. Moreover, we are curious whether the Chairman will actually follow through on the level playing field concept. Amazon and Google operate extensive fiber networks that support cloud services used by millions of businesses. Will the fiber-based business data services offered by those companies be subject to the same treatment as fiber-based business data services offered by cable operators and telephone companies? We will find out when the item is released, but nothing we heard yesterday suggests the playing field will be leveled in that way. More broadly, the notion of Chairman Wheeler as a champion of the level playing field and technological neutrality is odd because, until now, many of the policies advanced by the Wheeler FCC fall far short of that standard. For example, NCTA would have welcomed a neutral approach in the context of broadband high cost support, but instead the Commission has given incumbent telephone companies exclusive access to $30 billion in subsidies while other providers were relegated to the sidelines. A level playing field also would have been an improvement over the one-sided Internet interconnection rules the Commission adopted, which subject the network on one side of the exchange to regulation and complaint proceedings, while the other side is free of any obligation. Should we hold out hope that the final rules on privacy and navigation devices will create a level playing field among all competitors or will we see the same “thumb on the scale” approach embodied in the Commission’s initial proposals? Time will tell. None of this is to suggest that technological neutrality or level playing fields are not worthy concepts. But in today’s communications marketplace, where there is substantial competition among companies that are different sizes, that have different histories and different plans for the future, that offer a different mix of services, and that use different technologies, simplistic buzzwords rarely will produce meaningful answers and they certainly are no substitute for serious legal, economic, and policy analysis.