IIA Paper Shows FCC Inaction on IP-Transition Threatens Harm to Consumers, Competition, and the Economy

Today the Internet Innovation Alliance released a paper demonstrating three primary conclusions:

  1. Consumers are abandoning “plain old telephone service” (or “POTS”) in droves;
  2. The most regulated communications companies – i.e., the incumbent telephone companies (or “ILECs”) – are wasting enormous amounts of capital maintaining POTS rather than expanding their broadband networks; and
  3. As a result of this downward spiral of lost subscribers and wasted capital, ILEC wireline networks are struggling to compete with less regulated networks and communications companies – i.e., Internet, cable, and wireless companies.

The paper supports these conclusions with copious research data obtained from the FCC and other credible sources.

If there was any remaining doubt that the United States must (1) establish a deadline for shutting down the POTS network and transitioning to all Internet Protocol networks (the “IP-transition”) and (2) modernize its regulatory framework to eliminate the regulatory disparity that is hamstringing investment and competition among communications providers, the IIA paper has laid those doubts to rest for all (save those who are benefitting from the status quo, for whom I doubt any amount of data would prove sufficient).

Not that there were many doubters out there. There is already widespread agreement among groups from both right and left of center that the IP-transition should occur while the “safety-net” of the POTS network still exists (meaning it needed to start yesterday). In the National Broadband Plan, which celebrated its third birthday months ago, the FCC concluded that current regulations requiring ILECs to maintain POTS are “not sustainable” and “lead to investments in assets that could be stranded.” In 2011, The FCC’s Technological Advisory Committee, which was led by FCC Chair nominee Tom Wheeler, recommended completion of the IP-transition by 2018, a sunset date that would occur two-years earlier than the 2020 date currently proposed by ILECs.

There also appears to be agreement between left-of-center Public Knowledge and AT&T regarding five fundamental principles that should govern the IP-transition (though I expect the devils will be where they always are – in the details).

All of which begs the question: Why hasn’t the FCC already commenced a comprehensive proceeding to ferret out these devils and move forward on the IP-transition before it is too late?

I wish I knew the answer. Though I expect that, even if the FCC had intended to act on the IP-transition, the government shutdown and the confirmation process would offer reasons for delay, these recent events do not explain the FCC’s past lethargy. I’ve previously wondered whether the FCC is stalling to preserve its jurisdiction, practicing the fine art of avoiding a disruptive truth, attempting to protect particular competitors, or some combination of all of the above. My greatest fear, however, is that the FCC’s inaction on the IP-transition is part of an emerging pattern of practice at the agency in which it uses its regulatory leverage to extract concessions through non-public negotiations from private companies who are seeking regulatory relief.

The “agreements” resulting from these negotiations are often memorialized in orders issued at the Bureau-level, which are neither subject to bi-partisan debate among the Commissioners nor judicial review. Recent examples of inside deals at the FCC include bureau-level decisions waiving spectrum restrictions for LightSquared and extending its satellite launch milestones in exchange for its consent to limitations on its future business dealings, and the Wireless Bureau’s not-so-cleverly-concealed agreement to provide extensive regulatory relief to DISH Network in exchange for its commitment to bid at least $1.564 billion in the upcoming auction of spectrum in the H block.

For such tactics to be maximally effective, however, the FCC must wait as long as possible to take meaningful action. Perhaps the FCC believes a particularly lengthy delay in the IP-transition is necessary to soften up the ILECs before the FCC makes an offer they can’t refuse?

I hope not. Though the FCC’s recent trend toward embracing informal regulatory coercion to produce particular outcomes offers a possible explanation for its reluctance to act on the IP-transition, I expect the new FCC Chairman will embrace a more thoughtful and transparent approach. He is too experienced to engage in such “amateurish behavior” when consumer demand for broadband Internet services, robust competition among Internet infrastructure providers, and our economic growth are all at stake, especially when market trends have become so undeniably clear (as demonstrated by the IIA paper).

The IIA paper issued today does not have all the answers for resolving all potential obstacles to completing the IP-transition that might arise tomorrow, but neither does anyone else. What the IIA paper does have is overwhelming evidence that we cannot afford to delay the IP-transition while we wait for perfect solutions to every potential problem, including those we haven’t even identified yet. Like the broadcast and mobile analog-to-digital transitions that preceded it, the IP-transition is likely to require that we identify and overcome unforeseen obstacles as we go – but only if we get going.

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