The FCC today unanimously approved SBC’s acquisition of AT&T as well as Verizon’s purchase of MCI, ending a federal approval process that began early this year. For these mergers to take effect, now all that is needed is approval by a few remaining state regulators.
Symbolically, the mergers revolutionize the telecom industry–ending for all intents and purposes the 20-year split between long-distance and local portions of the industry, and he political warfare that went along with it. Yet, there was always less to the mergers than met the eye. Their effect on the marketplace will actually be quite limited. It been a few years since consumers looked to AT&T and MCI for telecom choice, moving instead to wireless and net-based alternatives. And with E-Bay and Google now playing on the telecom field, the significance of these mergers wi. (See “Ma Bells’ Retirement: No Big Deal“) And, with SBC’s announcement that it will change its own name to AT&T, even the cosmetic change is diminished.
Still, there’s a fair amount of gain to be had by integrating these firms into SBC and Verizon respectively. Yet, these gains will be limited, thanks to regulatory conditions placed on the deals. Each firm pledged to abide by restrictions demanded by the Commission, ranging from leasing lines toEven this will be limited, though, by 13 specified conditions, ranging from a freeze on UNE rates to maintaining “settlement free” peering policies for Internet backbone traffic (though the Commission found the mergers did not threaten competition in this market). The conditions even included special commitments regarding the state of Alaska.
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CEI will be hosting a lunch event on the Hill this Friday at noon. The focus will be on how we should be thinking about telecom reform in evolutionary terms, of phasing-out current law while not adding new laws to cover new technologies. I’ll be speaking and so will fellow TLF member James Gattuso, Randy May of PFF and Blair Levin of Legg Mason. The discussion of telecommunications regulation can quickly get bogged down by details. And while details are important, we must keep true to a broad deregulatory vision that I outlined (along with my colleague Wayne Crews) in Communications without Commissions: A National Plan for Reforming Telecom Regulation. The essence of my proposal is a series of phased deregulatory initiatives: 1) Setting jurisdictional boundaries; 2) Removing current economic and social policy regulation; and 3) Reforming the FCC and Spectrum Management. This deregulatory vision has been absent from the two main bills that have been proposed, though Senator Ensign’s bill is more deregulatory than the House Commerce Committee Discussion Draft bill.
The market research firm In-Stat reports that 9.4 percent of the nation’s 193 million wireless subscribers have already made their mobile phone their primary phone and the firm expects that percentage to grow to 23 to 37 percent by 2009.
Hopefully our wireline-obsessed policymakers in Washington will read this report and realize that their seemingly endless efforts to regulate wireline networks will only seek to further disadvantage those networks relative to the new wireless and Internet-based competitiors. Of course, it is more likely that lawmakers and regulators will simply respond to this news by finding new ways to regulate new wireless technologies and competitors.
Believe it or not, cell phone movie makers now have their own Academy Awards, at least in Europe, that is. The BBC reports that Europe’s first film festival for mobile phone movies will open this week in Paris.
While mobile video is just starting to catch on here in the U.S., it is all the rage over in Asia and Europe since citizens have been quicker to jump on the wireless bandwagon there. As a result, cell phone “art” has been quicker to develop and is now even the subject of contests and awards.
I find this particularly interesting in light of Europe’s ongoing efforts to expand media regulation. You will recall that Patrick Ross released a short paper last week about efforts underway in the European Union to grapple with media convergence and the challenges it poses for traditional media regulation. In “Regulation Without Frontiers: Europe Shows U.S. Policymakers How Not to Embrace Convergence,” Patrick notes that European regulators are foolishly looking to impose outmoded, broadcast-era regulatory mandates of the fast-paced, borderless new world of online media.
So what do the EU regulators plan to do about all these mobile media movies and videos that are now winning awards?!? How are they going to regulate all this stuff? If, for example, someone creates an award-winning but very controversial film and makes it widely available via mobile devices, how are regulators going to bottle that up? Are they going to fine that person directly (assuming they can find them)? Or are they going to force mobile media network providers to police their networks and censor on behalf of government? Are they going to require all this stuff to be rated or filtered? Regardless of the enforcement path they choose, I just don’t see how it could work.
Of course, we can expect this same debate to come to America very soon. We’re already seeing early proposals to extend broadcast regulations to cable and satellite, so it wouldn’t be surprising to see regulators target mobile media next.
In case you missed it, The Economist ran an excellent editorial and survey article last week on the ongoing Internet revolution in the phone business. The title on the cover, “How the Internet Killed the Phone Business” is a bit misleading–as the article points out, telephony will likely expand massively as Internet technologies take hold. It’s the existing telephone companies that are at risk. Interestingly, the article argues that its not traditional wireline firms that are most threatened – since they are quickly moving into Internet-based services themselves. Rather, say the authors, stand-alone wireless firms who are more dependent on voice calls have the biggest reason to worry. The magazine’s overall conclusion:
It is now no longer a question of whether VOIP will wipe out traditional telephony, but a question of how quickly it will do so. People in the industry are already talking about the day, perhaps only five years away, when telephony will be a free service offered as part of a bundle of services as an incentive to buy other things such as broadband access or pay-TV services. VOIP, in short, is completely reshaping the telecoms landscape.
Worth reading.
As noted in the post below, the telecommunications reform plan floated recently by the staff of the House Energy and Commerce committee includes some 80 regulations, mandates or restrictions. To be more precise, there are, by my count, 82–more than one per page. Of course, some might quibble over this number– the difference between a rule with two mandates and a rule with one two-part mandate is an ephemeral one. And certainly the mandates vary in significance. Some are trivial, some are burdensome, some are justified, some are outrageous. But any way you look at it, there are an awful lot of them. Here they are:
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After excellent posts on the subject by Adam and Braden, it may seem like piling on, but here’s my own take on the telecom reform draft bill. Bottom line: the rewrite needs a rewrite.
House Telecom Rewrite Needs a Rewrite
September 23, 2005
WebMemo #860
What happened to telecom deregulation? That was the question last week after the House Commerce Committee staff released proposed legislation to reform the nation’s telecommunications laws. The product of months of discussion and negotiation, the draft was billed as an effort to sweep away antiquated rules. “New telecommunications services,” said committee chairman Rep. Joe Barton (R-TX), “shouldn’t be hamstrung by old thinking and outdated regulations.”
Unfortunately, the actual proposal falls far short of this goal. While eliminating many unneeded rules, it also imposes many others. In all, the 77-page draft includes some 80 private-sector mandates and restrictions. Not only would telecommunications firms would remain over-regulated, but new rules would be imposed on previously unregulated Internet services. This attempted rewrite of telecommunications laws needs a rewrite itself.
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The September 15 discussion draft from the House Energy & Commerce Committee is aimed at reforming the nation’s telecom and cable laws. While it does change and “update” the law, is also succeeds at creating no less than 30 new mandatory and discretionary FCC powers!
It creates new complicated, technology-based rules to replace old ones (see Randy May in his PFF blog entry where he warns against regulatory techno-functional definitions–classifications). Congress should not expand the powers of the FCC by giving it a new role to regulate the latest technologies. But this is precisely what the discussion draft does (and Adam seems to concur in his post that the draft goes way too far in imposing new rules on broadband service and video providers).
At least 30 new functions for the FCC! Talk about full employment for FCC attorneys and economists (and their private sector equivalents). These new powers can be categorized as the ability of the FCC to a) create explicit rules, b) establish procedures, c) increase jurisdictional authority, and d) involve itself in determination proceedings and market oversight.
a) Rules: The draft mandates 18 different rulemakings or official inquiries, such as requiring that the FCC establish rules regarding intercarrier compensation, mandating the terms for franchise licensing, creating national consumer protection rules, devising a federal registration form for companies providing communications service, and any such regulations “as are necessary to implement this Act.”
b) Procedures: The FCC must invent procedures for overseeing the design of broadband infrastructure, for mediating and arbitrating disagreements regarding the exchange of VoIP traffic, and for resolving disputes over consumer complaints.
c) Jurisdiction: The draft bill provides the FCC increased authority to involve itself in standards setting, and even investigate and resolve disputes over network equipment standards.
d) Market Oversight: The FCC would have considerable powers overseeing broadband market decisions, such as the reliability and integrity of communication networks and to whom and on what basis to offer video service.
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. . . When it’s regulated!
TechDirt has a post and (first) comment about FCC reform yesterday afternoon that epitomizes a problem with debates about regulation: Speaker complains of practices in a particular industry, posits increased regulation as the solution. Existing regulation is ignored, while “the market” is blamed for problems. Because of various beefs with telecommunications service (today, under regulation), the consensus (of two people, anyway) on TechDirt is that there should be more telecommunications regulation.
Gang, it’s sort of definitional that, in heavily regulated industries, regulation predominates over market forces. Where there is little or no regulation, market forces predominate. Take medical marijuana in San Francisco which, due to differences of opinion among the local, state, and federal governments, is about as little-regulated a market as we know of. There is plentiful, high-quality product with a variety of providers in friendly competition. No one is getting ‘screwed’ and, in fact, the providers of medical marijuana are as committed as patients and care-givers to providing palliative care. Elsewhere in the country, where marijuana (medical and otherwise) is very heavily regulated, to the point of prohibition, people are getting screwed: high prices and low quality (on down to bunk) – and they’re getting robbed, shot, and stabbed sometimes too.
Verizon has called for real FCC reform, under which, perhaps, market forces will predominate. The argument against, as I pointed out on TechDirt, is: We’re unhappy with the status quo so we want more of the same.
P.S. I don’t smoke pot – so save it.
[cross-posted from the PFF Blog]
The House of Representatives’ Energy & Commerce Committee released draft legislation yesterday aimed a cleaning up the nation’s telecom and cable laws. A revision of the Telecom Act of 1996 has been in the works for some time and is very much needed, so most parties welcomed this news.
Here at PFF, of course, we’ve been working hard with a group of respected academics and experts to provide a new framework for communications policy reform. That project is called “DACA,” which stands for Digital Age Communications Act.
One thing we largely left out of DACA effort was any in-depth discussion of video regulation. That is, the extensive “public interest” regulatory regime that currently covers the broadcast sector and to some extent cable and satellite services. There were several reasons we left it out of the DACA project; most importantly, we simply felt that most of these rules could easily be sunset in light of growing competition in the multi-channel video marketplace and the media universe more broadly. Under our DACA framework, any “market power” problems that might develop in the future video / media marketplace would be handled with simple competition policy principles borrowed from antitrust law.
So Much for “Hands Off the Net”
Unfortunately, after looking through the House Commerce Cmmt. draft legislation last night, I realize that not everyone shares our opinion about the growing media market competition alleviating the need for extensive “public interest” regulation of the video marketplace. Specifically, Sec. 304 of the bill (which begins on pg. 41 of the discussion draft) is entitled “Application of Video Regulations to Broadband Service Providers.” Section A which immediately follows is appropriately labeled “Comparable Requirements and Obligations,” and then goes on to not how “each of the following provisions of the 1934 [Communications] Act, and the regulations under each such provision, that apply to a cable operator shall apply to a broadband service provider under this title in accordance with regulations prescribed by the Commission…”
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The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.