- - Thursday, May 28, 2015

ANALYSIS/OPINION:

Like a thief in the night, the Federal Communications Commission (FCC) recently denied eight separate petitions requesting the agency delay the implementation of new Internet regulations while they are challenged in court. While the late-afternoon news dump and decision was predictable, it is no less disappointing that the Internet will soon be subjected to 20th century telephone monopoly-era regulations.

To stave off the rules, which are due to go into effect on June 12, Congress, especially the Democratic Party, must now do its part. Past precedent and common sense should theoretically draw them to the table, but at this point it is anyone’s guess.

Perhaps they can consider the following.

The old Ma Bell telephone system owned, operated, and built by AT&T, was defined and regulated as a monopoly in the Communications Act of 1934. The FCC was created by Congress to have jurisdiction and authority over AT&T and its monopoly services. As with all such government-created monopolies, it was deemed an essential service and in the public interest that plain old telephone service be available to all households.

AT&T was required to build new facilities and make upgrades and improvements using only ratepayer dollars. There were strict rules put in place to prohibit cross-subsidization from the other divisions, like Long Lines, Bell Labs or Western Electric. That is how any monopoly functions, and why any monopoly’s rates are regulated with an established rate of return. Thus, it was the government that determined AT&T’s profit margins.

In today’s economy, however, there is no telecommunications monopoly. The Internet available to consumers today was built by several entities using shareholder dollars. This is markedly different than the phone network of yesteryear, especially given the great risk that providers took and the investment they undertook to make it happen. According to some estimates, investment by private companies has been as much as $120 billion.

Under the Constitution, the government cannot interfere in legitimate business enterprises, especially their investments, profits or losses. So all companies are free to invest their own capital into any business venture. Likewise, private investors, whether individuals or investment firms, can choose to invest in these businesses. The Securities and Exchange Commission, not the FCC, was created by Congress to oversee all financial activity. Any allegations of anti-competitive behavior are dealt with by the Federal Trade Commission, not the FCC.

That is what much of this debate comes down to — unprecedented, heavy-handed regulations presented as a solution to hypothetical future business actions with absolutely no evidence today of abusive or harmful effects. The government thinks that by fitting a square peg (the Internet) into a round hole (telephone and utility regulations), it is protecting consumers. It could not be more wrong, and the consequences could be dire. It is an “inconvenient truth” that the entire “net neutrality” debate has been hijacked by narrow-minded zealots.

Today’s system of business investment is directly linked to the FCC’s Internet regulations. Freedom from government intervention is precisely how all U.S. Internet giants were created, including Google, Facebook and Twitter. With new rules in place, AT&T and Verizon have already said that they will not be investing in any new fiber-based, high-speed Internet facilities, precisely because of the uncertainty of the FCC’s regulations.

Look no further than Verizon’s recent purchase of AOL. As The Wall Street Journal editorial board noted, “We have $4.4 billion going to an AOL purchase that will do nothing to expand that service, increase coverage areas, or enhance bandwidth for Verizon’s more than 100 million wireless customers.” Building and maintaining its FiOS and wireless services was already a tall task, and the FCC just made it that much more difficult.

Predictably, such non-investment will freeze broadband infrastructure in time and limit consumer choice. In those rare communities with competing providers, expansion and upgrades will not happen. Ironically, President Obama’s pledge to make high-speed Internet available to 90 percent of all U.S. households is certainly doomed. Even the lure of government subsidies, like the expanded E-Rate program or the President’s ConnectEd initiative, will be insufficient for any entity to build new high-speed Internet facilities built to reach schools, libraries, community centers and hospitals.

The nation will quickly be stuck back in the 20th century.

While it may not gel with uber-progressive goals of a government-run Internet, this will be the reality and the “inconvenient truth” of the situation after June 11. The clock is ticking, and congressional Democrats must act now and join their Republican colleagues in passing legislation to reverse the misguided FCC regulations.

Christopher D. Coursen, a consultant on communications issues, was a lawyer for the Senate Committee on Commerce, Science, and Transportation.


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