Friday, April 8, 2011

Compulsory Data Roaming: The FCC Imposes a Duty to Deal

     The FCC’s recent Second Report and Order on data roaming obligations of facilities-based wireless carriers (see requires interconnection backed up with the power to resolve formal complaints if commercially driven negotiations fail.  The two Republican Commissioners dissented from the order based on the view that the FCC lacks jurisdiction to compel information service providers to interconnect.  The Democratic majority relies primarily on the view that Title III confers broad regulatory power over any venture using licensed spectrum, not just radio and television broadcasters.
     This order shows the FCC at its creative best.  The authors of the order manage to replace the failed Title I, ancillary jurisdiction rationale with an expansive interpretation of Title III, while avoiding the inconvenient fact that the Commission treats wireless broadband and data services as information services not subject to Title II oversight.  In this order the Commission creates a non common carrier duty to deal, i.e., wireless carriers must interconnect their data networks and provide access to roaming data service subscribers who take service from another unaffiliated carrier.
     Only AT&T and Verizon opposed the FCC’s efforts to remedy a market failure resulting from insufficient competitive necessity for the two major carriers voluntarily to offer reciprocal data roaming agreements.   The FCC correctly identified a problem that could prevent consumers from relying on their smartphones as mobile computers, but the Commission’s rationale may not pass muster with a reviewing court. 
     The FCC appears to impose a duty to deal on carriers based primarily on their use of spectrum and the Commission’s broad mandate to service the public interest.  By concentrating on Title III and the broad mandate in Section 706 of the Telecommunications Act of 1996 to promote Internet access, the Commission hopes it can impose a conventional common carrier interconnection obligation even in the absence of explicit statutory authority.  Because Title II cannot apply directly to data roaming, the FCC frames the interconnection obligation as a “spectrum usage condition” (¶66) and not a common carrier obligation.  The Commission presumes that this characterization makes it possible to maneuver around the limitation contained in Section 332 that limits the application of streamlined Title II common carrier obligations only to voice services that connect with conventional wireline telephone networks.   The Commission summarily states that it does not have to make the determination whether and how Sec. 332 applies, if more broadly all or other sections within Title III applies.
     The FCC attempts to differentiate compulsory data roaming interconnection from common carriage, by emphasizing that wireless carriers will not apply single, tariffed terms and conditions.  So in the Commission’s creative interpretation, a common carrier obligation does not exist when a carrier is compelled to negotiate on an individualized, carrier-specific manner. But surely the Commission has created a duty to deal and common carriage means only that a carrier must offer nondiscriminatory terms and conditions to one or more “similarly situated” users.  In other words the common carrier duty to provide service to all people “indifferently” can result in a tariff or contract serving just one user or carrier, because no other user or carrier has similar usage requirements.  For example, the fact that the United States government might have specific and large requirements unmatched by other users does not by itself convert service from Title II regulated common carriage to private carriage.
     The FCC’s dilemma results from the misguided decision to apply the deregulated “safe harbor” information service classification to any and all types of wired and wireless Internet access.  It seemed good at the time: a hands off the Internet commitment.  The Commisison had to construct creative distinctions between offering and providing telecommunications and between a standalone and identifiable telecommunications service and a telecommunications that becomes so integrated into an information service as to be inseparable.  Of course wireless carriers use telecommunications to link subscribers’ smartphones to a wireless data network via telecommunications.  But in the FCC’s mindset, a venture can qualify for complete deregulation if the Commission can identify an information service.  That’s how the FCC made it possible to reclassify Digital Subscriber Line service as non common carriage and that’s also how the Commission made it possible to convert wireless telephone companies into information service providers.
     Had the Commission shown some restraint in its zeal to deregulate it would not have to erect clever and largely unsustainable statutory interpretations to resurrect limited, but essential consumer safeguards.

News Flash!—FCC Identifies Market Failures in Wireless Marketplace

     The FCC’s recent Second Report and Order on data roaming obligations of facilities-based operators (see offers two fascinating insights, only one of which will receive much attention.  Scholars and practitioners alike will concentrate on the FCC’s use of Title III spectrum management as the basis for mandating data roaming negotiations, backed up by formal complaint resolution.  Analysts will marvel at how the Commission has managed to impose an interconnection regime without convincingly addressing how information service providers lawfully bear such duties.  Additionally the Commission  does not fully explain how the duty to negotiate on commercially reasonable terms and conditions does not constitute common carriage and a “duty to deal.”   
     In a future blog I will address these issues, but now will consider another matter unlikely to get coverage.  This document is very, very important, because the FCC clearly identifies instances where the nature and type of wireless competition is inadequate to guarantee data roaming agreements between the major national carriers, such as AT&T and Verizon, and just about any other carrier.   Only AT&T and Verizon opposed a data roaming obligation,  because, as noted by the Commission, these carriers have refused to deal (¶24) and market consolidation “has reduced the number of potential roaming partners for some of the smaller, regional and rural providers” while also reducing the need for AT&T and Verizon to secure reciprocal roaming agreements (¶27).
     Such candor coming from an agency that never saw a wireless merger it could not approve and has never disputed industry claims how tirelessly they have to compete.  So if the wireless marketplace is so vigorously competitive would it not stand to reason that AT&T and Verizon would have to offer nationwide data roaming so that their data coverage maps show ubiquitous access?   If this market operated competitively would not AT&T and Verizon conclude that they should offer smaller carriers reciprocal access, even if doing so offers greater opportunities for little carriers to offer a competitive national data access service.
     It appears that the FCC acknowledges a market failure existing for a category of service that will become increasingly important.  If as advertized smartphones have become the functional equivalent of a wireless computer, then carriers have to offer near ubiquitous broadband access.  A deliberate strategy of denying interconnection by AT&T and Verizon, which the FCC identifies as occurring, constitutes an intentional tactic to exploit their market power and to further differentiate their services as superior. 
     We can dispute whether these two carriers have a compulsory duty to deal—as common carriers, or licensed spectrum users-- but one fact is indisputable: the need for the FCC to compel interconnection means that no market-driven incentive exists for AT&T and Verizon to offer interconnection reciprocity.  The FCC had to intervene, because the so-called competitive wireless marketplace would not prevent two dominant carriers from exploiting their dominance to achieve anticompetitive goals.

Tuesday, April 5, 2011

Panadora Investigation

Marketplace Morning offers a few secs. of my thoughts on Pandora mobile apps investigation:

Nice to receive a call at 6:45 am not involving a calamity.