Thursday, August 23, 2012

How the FCC’s 8th Broadband Report Became a Referendum on the Marketplace

           Only in this hyper-partisan environment can an FCC report become a stalking horse for libertarianism and antipathy to limited government efforts to stimulate broadband supply and demand. The Report (available at: http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-12-90A1.doc) offers a well-researched and appropriately granular analysis of broadband market penetration in the United States.  It provides ample evidence of progress, but candidly acknowledges that a significant portion of rural America, populated by 19 million people, have no broadband access and are unlikely to have the privilege without government developmental support.   Perhaps this Report has triggered such vigorous opposition, because several years ago a previous Report had a “mission accomplished” theme based on a toting up of even slow speed broadband options that were considered available to all within a zip code area even if only one subscriber existed.

            The Report has triggered vigorous dissent from the two Republican Commissioners, sponsored researchers and libertarian leaning publications by stating what I thought was obvious: there are plenty of areas in America where marketplace forces work against the offering of any affordable broadband access option, particularly wire-based services. I will go so far as to use two words that apparently cannot be uttered: market failure.  

            Broadband wireline options from carriers such as Verizon and AT&T do not even serve many urban and suburban locales.  These carriers are hell bent to jettison their rural customers and the obligation to service as carriers of last resort offering telephone service.  They have doubled down on wireless and do not seem to care about declining DSL subscribership and the need to migrate to faster transmission speed services outside the metered and more expensive wireless option. Smaller carriers do want to provide broadband services and generally have expressed support for FCC efforts to extend universal service subsidies.

            Some time ago both Democratic and Republican Commissioners at the FCC typically would thank the staff for doing such a comprehensive and conscientious job in preparing a Congressionally-mandated Report.  They would consider factors such as the public interest as their foremost concern, not whether they could accrue brownie points for their party and its ideology.  FCC Commissioners of both parties gladly supported extraordinary and admittedly too generous and inefficient universal service programs.  These initiatives included “rate integration” that required carriers to average in the higher costs of providing telephone service in non-continental United States locales, e.g., Alaska, Hawaii, Puerto Rico and the Virgin Islands.  No one balked at providing “free” satellite earth stations to Pacific island residents whose governments have an affiliation with the United States, e.g., The Federated States of Micronesia.  Nobody invoked Ann Rand to suggest that rural residents should suffer any cost disadvantage for the various upside opportunities from living in the hinterland.

            Now a Report to Congress somehow has all sorts of underlying messages.  By truthfully answering a question posed by Congress that more work needs to be done to achieve ubiquitous and affordable broadband, the FCC apparently is foreshadowing a broad agenda to preempt the marketplace.   See Larry Downes, How the FCC sees Broadband's 95% Success as 100% Failure, Forbes (June 23, 2012); available at: http://www.forbes.com/sites/larrydownes/2012/08/23/how-the-fcc-sees-broadbands-95-success-as-100-failure/.  And what kind of preemption would there be?  Most subsidies flow directly to the carriers!  But instead of acknowledging that carriers stand to benefit financially from such subsidies, opponents of candor strive to see some hidden agenda, including an effort by the FCC to impose network neutrality—if not the public utility, common carrier regime—on broadband.  

            At an unprecedented rate, the entire telecommunications policy ecosystem has become so politicized as to ignore the first principle of serving the national interest.  Instead we have warring parties arguing over whether and how government is subverting market forces that time and again work against making service available absent government efforts to stimulate supply and demand.

           

2 comments:

Kathy Jarmiolowski said...

Interesting that with all the money invested in broadband that so many still do not have access. Where did all that money go?
http://www2.ntia.doc.gov/SBDD

Richard Bennett said...

I think you're missing a couple of important things. Sec. 706 is written very narrowly. It doesn't ask the FCC to do whatever it takes to make life better for everyone, it asks for a report on the ways that over-regulation might be preventing the spread of "advanced telecom" across the nation. 706 doesn't even imagine that there might be a market failure scenario.

The FCC is apparently tired of answering the same question with the same answer year after year, so they've taken to answering a different, more fun question. That's understandable, but they seriously screwed up this year by arbitrarily deciding that broadband by satellite or 4G isn't an "advanced telecom service."

I think that arbitrary omission gives the FCC's critics all the ammo they need.