In the Coming Battle over Net Neutrality, Bell Companies Prefer the FCC to the FTC

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August 11 - Presumptive Republican presidential nominee John McCain is preparing to launch a new telecom and technology agency, according to this report by Dow Jones.

In the story, Dow Jones paraphrases McCain domestic policy advisor Douglas Holtz-Eakin as saying that McCain thinks that the Federal Communications Commission shouldn't be drafting rules for new markets. "Instead, McCain wants the FCC to function more like the Federal Trade Commission, which analyzes the impact of companies' endeavors before it acts," according to the report.

There's more to that distinction -- FCC versus FTC -- than meets the eye.

Consider what happened about an hour after the Federal Communications Commission took its enforcement against Comcast for "block[ing] content and significantly interfer[ing] with a person’s ability to access applications and content of their choice": advocates pushing for Net Neutrality held a congratulatory phone call.

That was expected. Net Neutrality partisans from Free Press, the Open Internet Coalition, Public Knowledge and Vuze emphasized the seminal aspects the Comcast punishment decision -- and the need for further legislative action.

The unexpected part was who else showed up at the party: Lawrence Spiwak, President of the Phoenix Center for Advanced Legal and Economic Public Policy Studies.

The Phoenix Center used to be a critic of the Bell companies. It pushed the economic case for "unbundling" the telephone network, or requiring the Bell to share their lines with long-distance competitors like the old AT&T.

Soon after AT&T was bought by SBC (SBC took on the name of the better-known and more-storied acquisition target) and became the new AT&T, however, the Phoenix Center began to focus on other issues, like promoting national video franchising. That was the Bell's agenda during the 109th Congress, the last one controlled by Republicans.

Lately, the Phoenix Center has taken to criticizing Network Neutrality, or the idea that carriers should be barred from striking preferential deals with favored business partners. Sample titles: "Only Winners from Network Neutrality Regulation to be Content Providers, Consumers Lose," "The Efficiency Risk of Network Neutrality Rules," and "The Burden of Network Neutrality Mandates on Rural Broadband Deployment"

But now, with Republicans' poll numbers in the tank -- and with presumptive Democratic presidential nominee Barack Obama being the first presidential candidate to come forward with a detailed prescription for Net Neutrality -- the telecom companies and their allies are beginning to realize that they need to come up with a Plan B, and fast.

And that is where the battle over Net Neutrality begins again. Today, my friend Paul Kapustka over at Sidecut reports has just released a detailed analysis about what just happened -- and what's likely to happen -- in the next phase of the Net Neutrality fight.

Here's the dilemma for the Bell and cable companies, according to Kaps' new report:

"With the Democrats in control of both the House and the Senate, the odds of Congress drafting some kind of writ-in-stone net neutrality legislation in the near future are looking more likely, especially if Obama were to win the Presidency. The best way to head such legislation or regulation off at the pass, if you listen to the telcos, is to argue that the 2005 principles are all the rules the FCC needs to police and enforce any net neutrality infractions."

Well, that's exactly what Spiwak was arguing when he joined with the pro-Net Neutrality forces on the call.

After thanking Free Press "for inviting me to be a part of this conference call," he noted that the Phoenix Center's research on the effects of Net Neutrality regulation has led them to be "very much on the other side of this issue from other people on this call."

So why team up? For Spiwak (and, as Kaps documents in his report, for key Bell lobbyists), the answer is that FCC Chairman Kevin Martin's actions shows "why additional legislation is unnecessary."

Clearly, they won't get any agreement on that from the Free Press crowd. But what do they agree upon? "We agree that the FCC is the proper place and forum to adjudicate issues of Net Neutrality -- far better than the antitrust agencies," such as the Federal Trade Commission.

I called up Spiwak to ask him why, given that he believes that Net Neutrality complaints were best adjudicated on a case-by-case basis, the FTC (or Justice Department) wouldn't be a better place to do so than at the FCC?

"You need that level of specialization," Spiwak said, referring to the FCC. Although the Phoenix Center agrees with the McCain-ites that Net Neutrality complaints are best adjudicated on a case-by-case basis, for Spiwak, the antitrust agencies are too static and limited in their analyses to handle the task.

Further, "the FCC is often in a very difficult position," Spiwak said. Congress wants it to promote competition, but it also wants subsidies for universal service. "Those goals are contradictory, but Congress wants both of them."

And for the Bell companies seeking to avoid new mandates for Net Neutrality, the devil that they know at the FCC is a lot better than the devil that they don't at the FTC.