Thursday, October 1, 2009

The Regulatory Arbitrage Lovefest

My day job, which includes finishing a book, updating a broadband law treatise, and trying to engage undergraduate students in the challenges of telecommunication and Internet policy, prevents me from weighing in each time I see yet another outrageous claim on such issues as network neutrality, broadband market penetration, and the competitiveness of U.S. telecoms markets. But I have to make time for this one.

As I understand from its letter to the FCC, AT&T objects to Google’s interpretation of law, regulation, and policy that qualifies Google Voice as an information service instead of lightly regulated long distance telephone service. This peach from AT&T—dare I say this—conflicts with the company’s previous claims that its wireless text messaging and wireline video services similarly qualify for limited regulation as information services.

So let me get this straight: in AT&T’s self-serving world (it is not a charity after all), the FCC should agree with it that text messaging is not a regulated common carrier, telecommunications service, akin to paging, and the company’s U-verse video program delivery is not a regulated cable service under Title VI of the Communications Act. Yet Google’s software-generated telephone calling service is a common carrier, telecommunications service even though it is not offered on a retail basis and rides on top of DSL, cable modem or other types of Internet access that the FCC and the Supreme Court already have deemed information services.

It is painfully clear to me that companies such as AT&T have a strategy of generating as much dissonance and nonsense as possible, regardless whether the positions pass a simple smell test. AT&T wants to ramp up the Fear, Uncertainty and Doubt level to prevent the FCC from making any definitive ruling on network neutrality.

AT&T has come up with an objection to an unregulated service that can provide something of a competitive alternative to its lightly regulated long distance telephone services. As consumers we want competitive alternatives and there are instances where inconsistent regulation may tilt the competitive playing filed in favor of an insurgent over an incumbent. But this regulatory arbitrage opportunity is both narrow, of limited value, and often short-lived. First AT&T overstates the degree of regulatory burdens it incurs in having to offer its long distance telephone service under regulation. The company does not have much paper work with the FCC and the Commission has forborne from regulating interexchange telephone services. So the scope of burden—financial and logistical-- is limited. Additionally AT&T conveniently forgets that it could have disputed the high call termination charges imposed by rural carriers. Neither AT&T nor Google want to pay extortionate access fees imposed by rural telephone companies when these companies exploit a regulatory arbitrage opportunity: the ability to generate lots of inbound traffic by offering free conference calling while paying carriers like AT&T much lower access charges when AT&T terminates calls originated by customers of the rural carriers.

The bottom line is that AT&T has had plenty of opportunities to avoid regulation based on the gigantic deregulatory safe harbor offered by the information service classification. Now AT&T has the nerve to object to Google’s use of the same opportunity. Now that's "the kettle calling the pot black."

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