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Broadband Credibility Gap

Phoenix Center Economist Drubs FCC for Unclear Policies

in Broadband Updates/Broadband's Impact/FCC/National Broadband Plan/Net Neutrality by

WASHINGTON, July 8, 2010 – A Phoenix Center economist said Thursday that no one “would really believe that [the FCC chairman’s] administration would go down in history as light touch regulators,” and that the Federal Communications Commission already had reneged on that promise.

George Ford, an economist with the Phoenix Center for Advanced Legal and Economic Policy Studies, spoke at an event hosted by his employer titled “The Broadband Credibility Gap,” which was also the title of a research paper he presented.

Ford argued that the FCC’s own statements, and its refusal to adhere to light-touch regulation completely, would induce business to withhold investment from telecommunications out of fear of excessive regulation.

“The pay off to the regulator is higher with more heavy-handed regulation and the firm, seeing this, says they’re not going to make an investment,” Ford said. “The FCC cannot precommit to light-touch regulation.”

Ford cited statements by former FCC Chairman Michael Copps, to whom Ford attributed the quote, “Frankly, I would have preferred plain and simple Title II reclassification through a declaratory ruling.”

Ford said this quote showed the dangers of a future FCC application of Title II in its entirety, even if it was not evidence of any intent on the part of the current FCC regime to apply all of Title II. While he acknowledged the FCC’s public statements that regulating the internet unnecessarily was not its goal, Ford dismissed these statements as political showmanship.

“The problem with this is the argument has no credibility in an economic sense,” Ford said.

Following Ford’s presentation was a panel discussion in which several experts expressed their concerns regarding the FCC’s potential Title II regime. In response to a question about Wall Street’s reaction to Title II, Paul Glenchur of the Potomac Research Group noted that investors were puzzled by the FCC’s actions.

“I think Wall Street is, you know, they’re looking at this and they’re a little confused by it,” Glenchur said. “And I think they want to steer clear to a certain extent until they see how the dust settles.”

Kathy Brown of Verizon, meanwhile, denied that the Telecommunications Act, of which Title II is a part, had any relevance to broadband services at all. “Title II is about a rate of return regulated market. And so I get nervous when we start talking about this statute as even relevant to the age in which we now live,” Brown said. “The problem I have is that we don’t really have a statute yet that sets United States policy on where we ought to go and what we ought to do.”

Finally, in discussing the legal background for the FCC’s move to a “third way” regime, Jonathan Nuchterlein of the law firm Wilmer Hale said the FCC had been purposefully lazy in applying its mandates due to a confidence that Title II would eventually govern the internet. “There was a certain negligence in the FCC because they believed that under the worst case scenario, they could always do the Title II thing,” Nuchterlein said.

Chris Wright of Wilshire and Grannis argued that courts were less prepared to give government agencies leeway. “I don’t think the commission is fabricating a legal crisis, and I don’t think that it’s simply a badly written order,” Wright said. “I think there’s been a generational trend over the last 60 years wherein the courts used to simply like letting agencies take broadly worded statutes and run with them.”

Still, Wright expressed reservations about the FCC’s attempts to regulate the internet, citing a quote from Supreme Court Justice Antonin Scalia that, “The telecom act is a model of ambiguity and uncertainty, even self-contradiction.”

Following the discussion, the Center also hosted a conversation between Phoenix Center President Lawrence Spiwak and FCC Commissioner Robert McDowell.

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