Common Carriage Regulation May Be Evolving But Not Ending, PPI Panelists Say

Business broadband service may be one area where more regulation is still needed, some panelists argued. The business broadband market is, by all indications, characterized by substantial market power, said telecom lawyer Thomas Jones of Willkie Farr. Jones, who has represented CLECs, emphasized the importance of that sphere and specifically the efficiency of ethernet. “It’s the infrastructure for everything,” Jones said. “It is the infrastructure for the economy, and it is absolutely key.” Dominant market players, without substantial competition, could skew pricing and other factors in that scenario, one example where common carrier obligations may still make sense in the future, he said. The real question is when the benefits of common carrier obligations outweigh the regulatory costs, and the level of competition or lack of competition determining that may be up in the air, he said. “That could be a matter of personal preference -- fair enough. I submit there are some situations like that.”

"The outlook for competition in the business space is getting even better because the cable operators are moving vigorously in this space,” Singer said, saying they're under attack in the video space. “They have to” compete more for business customers, said Singer of cable operators. He called it both funny and sad how little real data the FCC has produced about the telecom business market.

"Should we regulate the Internet like a phone company?” asked Christopher Yoo, law professor at the University of Pennsylvania. The U.S. initially rejected that idea but has begun to shift, as proponents advocate for the firmness of FCC net neutrality rules and for regulation of VoIP, Internet interconnection, search engines, cloud computing, mobile devices and social networks, he said. Some people romanticize common carriage regulation, but the literature from 20 to 30 years ago indicated the regulations didn’t work that well, he said. Yoo agreed that more regulation may be necessary in some situations, but said there needs to be clear evidence.

The modern rationale for such regulations is market power, Yoo agreed, though added common carriage has a longstanding problem in that it’s hard to define scope as well as inherent limitations of what it can do well. Jones underscored the “amorphous” nature of common carriage and its different meanings. “There are certain social policy objectives that people think are important” that require common carriage designation, which will continue to be with us in some form, Jones said, noting its significance in giving the FCC power to address different situations, such as in the agency’s recent rural call completion order. “People agreed this was a problem, and the FCC was able to do something about it because the voice providers were common carriers,” Jones said, also noting the importance of the agency’s ancillary jurisdiction.

Bad regulation can easily be worse than no regulation, said Michelle Connolly, economics professor at Duke University. “We shouldn’t be proposing solutions to problems that are theoretically unlikely,” she said, pointing to what she saw as the hubris of regulators in trying to impose optimal regulations. There’s a danger of static regulations creating entitlements, directly unproductive activities, heavy administrative costs and other concerns, she said, pointing to the FCC’s USF: “Think of the entire apparatus necessary for this.” Connolly was chief FCC economist under then-Chairman Kevin Martin.

Singer distinguished between traditional obligations, such as carrier of last resort, tariff filings, just and reasonable rates, and modern obligations such as duty to interconnect with complementary service and to interconnect with rivals. “Competition largely extinguishes the need for any of” the former obligations, Singer said. Yoo pointed to what he called the success of deregulated wireless, but Public Knowledge Senior Vice President Harold Feld said that’s not entirely true. Carriers still have certain obligations of interconnection and voice roaming, said Feld. He pointed to the danger of, even in a market with some competition, possible coerced censorship silencing unpopular speakers, citing the case of pressure to limit contributions to WikiLeaks. “Is there a value of maintaining common carriage as a shield to this potential censorship?” Feld asked.

Commissioner Ajit Pai’s wireline aide Nicholas Degani, addressing panelists, said from the audience that the FCC still requires tariffs from telcos in the residential voice market. He questioned whether the agency should reduce the tariff filing obligations in that market. Singer agreed the residential market is effectively competitive. “There is a cost of imposing these obligations, especially in an asymmetric way,” Singer said. He wants telcos and cable companies “getting in a ring, unfettered, and beating each other’s brains out,” Singer said. Jones said two market players aren’t necessarily enough, and Yoo agreed. It’s “probably true that we can phase out these access charges,” Jones said.

Richard Clarke, AT&T assistant vice president-economic and regulatory policy, asked panelists how it was fair for interconnection obligations to be part of common carriage. He said traditional common carriage obligations were intended to serve customers but sometimes seem more associated with the monopoly concerns. He pointed to the difference in size between companies and the comparative for the smaller ones able to interconnect.