Monday, February 9, 2015

The Title II Reclassification Distraction


            By now even most of my undergraduate students at Penn State have heard about the FCC’s likely reclassification of broadband access from information service to telecommunications service. So much attention has focused on the reclassification and so little on the real problem: stimulating investment, market entry and facilities-based competition in broadband service.

            Show me a robustly competitive broadband marketplace and I will show you an ecosystem that has no network neutrality problem. 

            Regulating broadband access as common carriage offers no panacea.  Even with light handed regulation, the potential exists for extraordinary waste and distraction in litigation and a “regulatory practice” over what an Internet Service Provider can and cannot do.  I am concerned that the FCC and stakeholders will devote far too much time battling over minor points with little concern for the big picture.

            While I am not keen on Title II regulation, I have every confidence that ISPs can survive the burden and sustain capital investment levels.  The problem in Title II regulation lies in how it can distract the FCC from its core mission.  Bear in mind that wireless carriers have managed to thrive despite having the common carrier classification.  So even “public utility” Title II regulated markets can generate ample profits without apparent investment “disincentivization” resulting from government oversight.  Wireless competition forces carriers to enhance the value proposition.  No carrier would dare degrade its service and invite subscriber churn.

            Thankfully the FCC and Justice Department did not buy the bogus claim of sponsored researchers, AT&T and T-Mobile that reducing the number of facilities-based competitors would serve the national interest.  Once deprived of a big buyout payday, T-Mobile has innovated and sharpened its pricing pencil.  The other carriers have had to follow T-Mobile’s lead on pricing, roaming, bring your own device and the ability to rollover data capacity.

            A competitive wireless marketplace provides clear evidence that Title II can provide possibly unnecessary safeguards without imposing costly burdens.  The risk in Title II broadband regulation lies in its distraction coupled with less than optimal competition.

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