TechKnowledge No. 34

How Four FCC Rulemakings Could Finally Break the Broadband Logjam

By Adam D. Thierer
March 28, 2002

On February 27, after months of acrimonious debate, the House of Representative finally passed a modified version of the Internet Freedom and Broadband Deployment Act of 2001 (H.R. 1542), which was sponsored by House Energy and Commerce Chairman Billy Tauzin (R-La.) and ranking member John Dingell (D-Mich.). The Tauzin-Dingell bill would allow Baby Bell telephone companies to provide customers with broadband services the same way cable and satellite companies are currently allowed to, free of the infrastructure sharing provisions of the Telecommunications Act of 1996.

The victory, however, will likely prove a Pyrrhic one for the Bells given the limited support the bill has in the Senate. Immediately after the measure passed the House, Sen. Ernest Hollings (D-S.C.), a longtime enemy of the Baby Bells and deregulation in general, vowed to kill the bill when it enters the Senate Commerce Committee, which he rules with an iron hand. Indeed, the first hearing the bill received in front of that committee on March 20 saw Hollings and a number of his colleagues vociferously denounce the measure. Worse yet, no one has yet stepped forward in the Senate to champion the bill as Tauzin and Dingell had in the House.

Luckily, however, while broadband deregulation legislation appears mired in a legislative quagmire, the Federal Communications Commission is currently considering four proceedings that could radically alter the face of modern telecommunications policy for the better. Although a legislative fix to the broadband regulatory mess would be preferable, these FCC proceedings hold out the hope that there might be another avenue of reform if congressional deregulatory efforts falter. These four FCC proceedings are:

* Unbundled Network Element Triennial Review (CC Docket No. 01-338): This massive rulemaking will examine the list of unbundled network elements (UNEs) that incumbent local exchange carriers (LECs) or Baby Bells must provide to rivals at regulated rates. Under the Telecom Act and subsequent FCC mandates, the LECs were required to share certain portions of their existing local telephone loops with competitors. Importantly, however, the Telecom Act did not speak to the issue of how services or technologies that emerged in the wake of the Act would be regulated. The Tauzin-Dingell bill proposes to clarify the law in this regard by creating a firewall between old voice-grade regulations and new broadband services, which the bill proposes to free from infrastructure-sharing requirements. Similarly, as part of its UNE Triennial Review, the FCC is looking into the issue of whether or not it can unilaterally free the LECs from such line sharing and other unbundling requirements when they deploy new broadband services.

* DSL Non-Dominance (CC Docket No. 01-337): In this “Review of Regulatory Requirements for Incumbent LEC Broadband Telecommunications Services,” the agency is investigating whether the Baby Bells should be considered to hold a “dominant” position in the broadband marketplace and thus face the same pricing and infrastructure sharing rules which govern the voice market. It seems likely that the FCC will have no other choice but to declare Bell-provided high-speed digital subscriber line (DSL) services “non-dominant” given that cable companies currently control roughly 70 percent of the marketplace.

* DSL as an “Information Service” (CC Docket No. 02-33): On February 14, the FCC opened a proceeding that will “resolve outstanding issues regarding the classification of telephone-based broadband Internet access services and the regulatory implications of that classification.” This investigation is important because if telephone-provided broadband is classified as an “information service” it would mean that DSL would fall under Title I instead of Title II of the Communications Act. Title II regulations, which cover traditional wireline telephony, impose a host of common carriage requirements on companies, including price regulations, interconnection mandates, and unbundling/line sharing rules. By comparison, services that are designated “information services” and covered under Title I face far fewer regulations.

* Cable Modems as an “Information Service” (GN Docket No. 00-185): A similar proceeding was opened by the FCC in September of 2000, entitled “Inquiry Concerning High-Speed Access to the Internet over Cable and Other Facilities.” The proceeding raised the question of how to define and regulate cable-provided broadband offerings. Historically, cable firms have not faced the same sort of infrastructure- sharing mandates on their lines that telephone companies have. In recent years, however, various interest groups and competing companies have been clamoring for open access mandates for the cable industry to equalize their regulatory treatment with telephone companies. On March 14, the FCC wisely chose the opposite path. The commission ruled that cable modem service was an “interstate information service” that would be free of state and local rules and regulated under Title 1 of the Communications Act. Importantly, the FCC held, “We seek to create a rational framework for the regulation of competing services that are provided via different technologies and network architectures.” The commission noted that the broadband market is “evolving over multiple electronic platforms,” and, therefore, the agency will “strive to develop an analytical approach that is, to the extent possible, consistent across multiple platforms.” This is important because it sets the stage for a similar ruling in the previously mentioned DSL “information service” proceeding.

Viewed together, these four proceedings offer the Federal Communications Commission and Chairman Michael Powell the chance to make good on his promise to avoid imposing a heavy-handed common carriage model on the emerging broadband marketplace. As Powell noted in a speech to the National Summit on Broadband Deployment last October, “Broadband is a synergetic product of two great waves crashing into each other. The first is the mature and heavy regulated world of communications. The second is the swift and unregulated peak of the computer revolution. The world waits to see whether the force of the second will subsume the regulatory energy contained in the first. It should and it will if we let nature take its course and not let the yellow submarine of central planning come crashing to the surface.”

Whether or not Chairman Powell and the commission follow through with this bold vision likely depends on what, if any, support he receives from the Bush administration. Regrettably, a leadership vacuum exists within the Bush administration on the broadband front that has yet to be filled. Aside from some bland generalities regarding the importance of broadband, no one in the upper ranks of the administration has set forth a coherent broadband policy. These four FCC proceedings offer the Bush team the chance to articulate a clear deregulatory vision and possibly generate a legacy for themselves as the administration that broke the broadband logjam and provided the legal environment necessary to help spawn a long overdue communications policy renaissance in America.

Adam Thierer (athierer [at] cato [dot] org) ) is the Director of Telecommunications Studies at the Cato Institute in Washington, D.C. To subscribe, or see a list of all previous TechKnowledge articles, visit www.cato.org/tech/tk-index.html.