Forbearance and Reclassification – It’s Like Peanut Butter and Jelly

WASHINGTON, June 8, 2010 – FCC Commissioner Mignon Clyburn spoke at the Media Institute last week on the issue of broadband authority and regulation.

Clyburn devoted the majority of her remarks to debunking the concerns of critics who oppose the FCC’s recent proposal to reclassify broadband Internet services under section II of the 1996 Telecommunications Act.

In the introduction to her remarks, Clyburn acknowledged that the FCC’s role did not involve easy answers, but required the agency to engage in an act of successfully balancing various, and sometimes competing interests.

“[I] believe that often the goals of innovation, investment, competition, diversity and consumer protection are in harmony,” Clyburn said. “But sometimes, that balance is thrown out of whack. Sometimes it is clear that certain incentives for business put industry at odds with what is best for consumers as a whole. And at those points, any responsible public servant must be ready to act.”

Current FCC rules dictate that broadband be classified under Title I of the law, which governs “information services.” The FCC had used this classification to enforce its mandate under the National Broadband Plan prior to the recent court case Comcast v. FCC, which struck down key elements of the FCC’s regulatory regime governing broadband as exceeding its authority under Title I.

In reclassifying broadband access under Title II, which governs “broadcast services,” the FCC would be permitted a wider scope of authority, but also would be tasked with applying a stricter set of rules, some of which would be either irrelevant or harmful to the industry, according to critics.

In order to blunt this criticism, the FCC has proposed a “third way” involving the concept of “forbearance,” which would allow the FCC to impose a Title II classification on the broadband industry, but to forbear from enforcing all the rules currently in force under Title II. Critics have charged that this approach produces an environment of increasing regulatory uncertainty, a charge which Clyburn’s speech was intended to refute.

Clyburn zeroed in on three areas of controversy surrounding the FCC’s proposal to reclassify broadband access. The first was that “the FCC should not embrace an old-style regulatory model created in the first-half of the 20^th century for monopoly voice networks.” In other words, the idea that a model designed to regulate television and phone access under the assumptions of 1950s-style technology is anachronistic and uncertain. Clyburn, however, dismissed this claim.

“It is simply false on its face,” Clyburn said. “It is clear from the chairman’s announcement that the entire point of his approach is to avoid applying any such old-world rules.  Under the chairman’s view, without forbearance there is no reclassification. You cannot have one without the other.  Think peanut butter and jelly.”

The next criticism to be addressed was whether the FCC ought to impose a significant regulatory change in the absence of what Clyburn called a “significant market shift.” According to the criticism, there was no demonstrated economic need for changing the regulatory framework, which implicated the proposed change as arbitrary. Clyburn dismissed this critique as being legally unsubstantiated and insufficiently cognizant of the effects of Comcast v. FCC.

“The long and the short of it is that the commission must simply provide a reasoned justification and not simply change course without explanation,” Clyburn said. “It need not demonstrate some broad market shift in the process.  The court left the politics to the political branches.”

She added: “Even putting the legal aspects aside, if the D.C. Circuit did not just hand us a ‘significant market shift,’ then I do not know what one is.”

Finally, Clyburn moved on to rebut what she called the most interesting argument, namely, that the chairman’s proposal creates regulatory uncertainty.

Clyburn argued that in the aftermath of Comcast v. FCC, the regulatory environment would actually be more uncertain if the Title I classification were maintained.

“We are coming off of a resounding blow to commission authority under Title I,” Clyburn argued, “and are left only with a hodgepodge of long-shot attempts to cobble together just enough authority to accomplish our goals.  Rather than just looking at one reclassification proceeding, we are now tangled in a web of Sections 254, 214, 706, 255, 256 and the list goes on.”

Secondly, Clyburn claimed that concerns over whether the FCC’s forbearance plan could be undone were overblown. “[Under the proposed system], we would have to actually go through the painstaking process of ‘unforbearing’ from applying any given provision of Title II,” Clyburn said. “A process, I might add, that has never occurred in the 17 years since forbearance has been in effect. Never.”

Lastly, Clyburn suggested that there was precedent for the FCC’s proposed plan in its regulations governing wireless access. “How is it that, on the one hand, these companies can praise the regulatory regime governing wireless, and on the other hand sound the alarm of ‘uncertainty’ for a nearly identical framework proposed for broadband connectivity?” Clyburn asked. “The level of uncertainty should be, at worst, equal.”

In concluding her remarks, Clyburn ended on an optimistic note regarding both congressional deliberations and the FCC’s potential for refor: “I think that together we can arrive at a decision that meets each of our goals – maybe not 100 percent for everyone – but at least at a level that moves us forward as a nation.”