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Regulatory Comments On behalf of the International Center for Law & Economics, I offer the following reply comments in support of the Federal Communications Commission’s (FCC) Notice . . .
On behalf of the International Center for Law & Economics, I offer the following reply comments in support of the Federal Communications Commission’s (FCC) Notice of Proposed Rulemaking (NPRM) to expand and enhance the use of the 5.850 – 5.925 GHz spectrum band.
In previously submitted comments, I offered support for the FCC’s proposed reallocation of the lower 45 MHz of the 5.9 GHz band based on the spectrum’s current underuse relative to its value in the context of Wi-Fi. Since those comments were submitted, subsequent studies have estimated that opening the lower 45 MHz of the 5.9 GHz band would result in $28.14 billion in economic value by 2025. These findings lend further support to the FCC’s proposed plan of action. Yet, opposition from elements of the transportation sector persists. Those opponents have offered, broadly, four justifications for delaying, modifying and/or abandoning elements of the FCC’s 5.9 GHz NPRM. ICLE’s reply comments will address and rebut each, in turn.
Click here to read the full comments.
Regulatory Comments In order to maximize the benefits of broadband to society, including through the provision of public safety communications and services, public policy must promote the . . .
In order to maximize the benefits of broadband to society, including through the provision of public safety communications and services, public policy must promote the proper incentives for broadband buildout. Both the 2015 Title II Open Internet Order (the “OIO”) and the 2017 Restoring Internet Freedom Order (the “RIFO”) were premised on this. But each adopted a different approach to accomplishing this objective.
The OIO premised its rules on the theory that ISPs are “gatekeepers,” poised to kill the golden goose of demand for broadband by adopting business practices that could reduce edge innovation.
The key insight of the virtuous cycle is that broadband providers have both the incentive and the ability to act as gatekeepers standing between edge providers and consumers. As gatekeepers, they can block access altogether; they can target competitors, including competitors to their own video services; and they can extract unfair tolls. Such conductwould, as the Commission concluded in 2010, “reduce the rate of innovation at the edge and, in turn, the likely rate of improvements to network infrastructure.” In other words, when a broadband provider acts as a gatekeeper, it actually chokes consumer demand for the very broadband product it can supply.
The RIFO, on the other hand, properly conceives of ISPs as intermediaries in a two-sided market that aim to maximize the value of the market by adopting practices, like pricing structures and infrastructure investment, that increase the value for both sides of the market.
We find it essential to take a holistic view of the market(s) supplied by ISPs. ISPs, as well as edge providers, are important drivers of the virtuous cycle, and regulation must be evaluated accounting for its impact on ISPs’ capacity to drive that cycle, as well as that of edge providers. The underlying economic model of the virtuous cycle is that of a two- sided market. In a two-sided market, intermediaries—ISPs in our case—act as platforms facilitating interactions between two different customer groups, or sides of the market— edge providers and end users. . . . The key characteristic of a two-sided market, however, is that participants on each side of the market value a platform service more as the number and/or quality of participants on the platform’s other side increases. (The benefits subscribers on one side of the market bring to the subscribers on the other, and vice versa, are called positive externalities.) Thus, rather than a single side driving the market, both sides generate network externalities, and the platform provider profits by inducing both sides of the market to use its platform. In maximizing profit, a platform provider sets prices and invests in network extension and innovation, subject to costs and competitive conditions, to maximize the gain both sides of the market obtain from interacting across the platform. The more competitive the market, the larger the net gains to subscribers and edge providers. Any analysis of such a market must account for each side of the market and the platform provider.
In other words, the fundamental difference of approach between the two Orders turns on whether it is edge innovation, pushing against ISP incentives to expropriate value from edge providers, that primarily drives network demand and thus encourages investment, or whether optimization decisions by both ISPs and the edge are drivers of network value. The RIFO rightly understands that ISPs have sharp incentives both to innovate as platforms (and thus continue to attract and retain end users), as well as to continue to make their services useful to edge providers (and, by extension, the consumers of those edge providers’ services).
The D.C. Circuit upheld RIFO’s fundamental rationale as a supportable basis for the FCC’s rules in Mozilla v. FCC. But it also accepted that three specific concerns were insufficiently examined in the RIFO, and remanded the case to the FCC to address them. Among these was the question of the RIFO’s implications for public safety. In its Public Notice seeking to refresh the record on the remanded issues, the Wireline Competition Bureau asks (among other things):
These are the questions to which this comment is primarily addressed.
In Part I, we discuss how the RIFO fosters investment in broadband buildout, in particular by enabling prioritization and by reducing the effects of policy uncertainty. In Part II, we describe how that network investment benefits public safety both in both direct and indirect ways. In Part III, we highlight the benefits to public safety from prioritization, in particular, which is facilitated by the RIFO.
Read the full comments here.
TOTM Advanced broadband networks are hot topics, but little attention is paid to the critical investments in infrastructure necessary to make these networks a reality. The FCC’s proposed 621 Order is an important measure to help providers deploy high speed broadband across a fragmented municipal regulatory environment.
Advanced broadband networks, including 5G, fiber, and high speed cable, are hot topics, but little attention is paid to the critical investments in infrastructure necessary to make these networks a reality. Each type of network has its own unique set of challenges to solve, both technically and legally. Advanced broadband delivered over cable systems, for example, not only has to incorporate support and upgrades for the physical infrastructure that facilitates modern high-definition television signals and high-speed Internet service, but also needs to be deployed within a regulatory environment that is fragmented across the many thousands of municipalities in the US. Oftentimes, the complexity of managing such a regulatory environment can be just as difficult as managing the actual provision of service.
Read the full piece here.
TOTM I had the pleasure last month of hosting the first of a new annual roundtable discussion series on closing the rural digital divide through the University of Nebraska’s Space, Cyber, and Telecom Law Program. The purpose of the roundtable was to convene a diverse group of stakeholders for a discussion of the on-the-ground reality of closing the rural digital divide.
I had the pleasure last month of hosting the first of a new annual roundtable discussion series on closing the rural digital divide through the University of Nebraska’s Space, Cyber, and Telecom Law Program. The purpose of the roundtable was to convene a diverse group of stakeholders — from farmers to federal regulators; from small municipal ISPs to billion dollar app developers — for a discussion of the on-the-ground reality of closing the rural digital divide.
TOTM This week the FCC will vote on Chairman Ajit Pai’s Restoring Internet Freedom Order. Once implemented, the Order will rescind the 2015 Open Internet Order and return . . .
This week the FCC will vote on Chairman Ajit Pai’s Restoring Internet Freedom Order. Once implemented, the Order will rescind the 2015 Open Internet Order and return antitrust and consumer protection enforcement to primacy in Internet access regulation in the U.S.
TOTM Next week the FCC is slated to vote on the second iteration of Chairman Wheeler’s proposed broadband privacy rules. Of course, as has become all . . .
Next week the FCC is slated to vote on the second iteration of Chairman Wheeler’s proposed broadband privacy rules. Of course, as has become all too common, none of us outside the Commission has actually seen the proposal. But earlier this month Chairman Wheeler released a Fact Sheet that suggests some of the ways it would update the rules he initially proposed.
According to the Fact Sheet, the new proposed rules are…
Regulatory Comments The NPRM and many of the comments supporting it reflect an ill-considered approach to privacy regulation for ISPs.
The NPRM and many of the comments supporting it reflect an ill-considered approach to privacy regulation for ISPs. Getting regulation right is always difficult, but it is all the more so when confronting evolving technology, inconsistent and heterogeneous consumer demand, and intertwined economic effects that operate along multiple dimensions.
[S]ecuring a solution that increases social welfare[] isn’t straightforward as a practical matter. From the consumer’s side, the solution needs to account for the benefits that consumers receive from content and services and the benefits of targeting ads, as well as the costs they incur from giving up data they would prefer to keep private. Then from the ad platform’s side, the solution needs to account for the investments the platform is making in providing content and the risk that consumers will attempt to free ride on those investments without providing any compensation—in the form of attention or data—in return. Finally, the solution must account for the costs incurred by both consumers and the ad platform including the costs of acquiring information necessary for making efficient decisions.
The NPRM fails adequately to address these issues, to make out an adequate case for the proposed regulation, or to justify treating ISPs differently than other companies that collect and use data.
Perhaps most important, the NPRM also fails to acknowledge or adequately assess the actual market in which the use of consumer data arises: the advertising market. Whether intentionally or not, this NPRM is not primarily about regulating consumer privacy; it is about keeping ISPs out of the advertising business. But in this market, ISPs are upstarts challenging the dominant position of firms like Google and Facebook.
Placing onerous restrictions upon ISPs alone results in either under-regulation of edge providers or over-regulation of ISPs within the advertising market, without any clear justification as to why consumer privacy takes on different qualities for each type of advertising platform. But the proper method of regulating privacy is, in fact, the course that both the FTC and the FCC have historically taken, and which has yielded a stable, evenly administered regime: case-by-case examination of actual privacy harms and a minimalist approach to ex ante, proscriptive regulations.
Regulatory Comments The Commission’s NPRM would shoehorn the business models of a subset of new economy firms into a regime modelled on thirty-year-old CPNI rules designed to address fundamentally different concerns about a fundamentally different market.
The Commission’s NPRM would shoehorn the business models of a subset of new economy firms into a regime modelled on thirty-year-old CPNI rules designed to address fundamentally different concerns about a fundamentally different market. The Commission’s hurried and poorly supported NPRM demonstrates little understanding of the data markets it proposes to regulate and the position of ISPs within that market. And, what’s more, the resulting proposed rules diverge from analogous rules the Commission purports to emulate. Without mounting a convincing case for treating ISPs differently than the other data firms with which they do or could compete, the rules contemplate disparate regulatory treatment that would likely harm competition and innovation without evident corresponding benefit to consumers.
Concerns relating to online privacy have been extensively studied by regulators and others over the past two decades. By and large, regulators responded to these concerns with a combination of a general case-by-case approach alongside tailored rules derived from the relevant information involved in particular areas of privacy concern. Few, if any, regulators have adopted an “opt-in” privacy regime for non-sensitive data such as the FCC proposes. The FCC’s proposed regime may have been cutting-edge in the 1980s and 1990s — but it makes no sense in today’s information economy in which firms from different segments of the economy fluidly enter each other’s markets and effectively compete in a separate, cross- sector, informatics and advertising market. The proposed rules instead dig in the heels of the Commission against the irresistible tide of progress, attempting to maintain arbitrary industry firewalls between firms.
The “problem” the Commission attempts to fix with this proposed rulemaking is not one of preventing ISPs from using personal information to prevent new entrants from effectively competing with their incumbent businesses — which was, in fact, the genesis of the CPNI rules.1 Rather, these rules are designed to keep ISPs from competing with edge providers like Google, Facebook, and Netflix. But, in truth, both edge providers and ISPs actually need general rules of broad applicability. This is what the FTC and other regulators have largely done to date. Such broadly applicable rules are designed to be competitively neutral, and to offer the flexibility needed to address the various concerns that may come up in these markets while balancing legitimate economic and privacy interests and providing an adequate level of notice to those subject to regulation about their expected norms of conduct.
In short, the Commission has not made a convincing case that discrimination between ISPs and edge providers makes sense for the industry or for consumer welfare. The overwhelming body of evidence upon which other regulators have relied in addressing privacy concerns urges against a hard opt-in approach. That same evidence and analysis supports a consistent regulatory approach for all competitors, and nowhere advocates for a differential approach for ISPs when they are participating in the broader informatics and advertising markets. Absent the collection and analysis of substantial evidence — which at this point has not been articulated by the Commission or those advocating the Commission’s proposed approach, and which is far beyond the scope of the present NPRM — the proposed approach is not supportable.
And all of the foregoing is particularly perplexing in light of the fact that the Commission will inadvertently create more consumer harm than benefit. At the same time, the Commission has not shown that regulatory efficacy, administrative efficiency or anything else demands such rules. Particularly given TerraCom and the demonstrated ability of the Commission to handle harms as they arise even absent prescriptive rules, the need for these aggressive new rules simply cannot be justified.
Regulatory Comments "The Telecom Regulatory Authority of India (“TRAI”)’s tradition of regulatory humility — the “forbearance and flexibility” that has characterized its approach to telecommunications services regulation — has enabled the explosive growth of internet usage throughout India..."
“The Telecom Regulatory Authority of India (“TRAI”)’s tradition of regulatory humility — the “forbearance and flexibility” that has characterized its approach to telecommunications services regulation — has enabled the explosive growth of internet usage throughout India, including an over 50% surge in the number of users of mobile internet in rural areas since 2001. But as the Authority considers regulations and rules to “ensure orderly growth… and protection of consumer interest,” it is important to keep in mind the fundamental lesson taught by decades of technology regulation throughout the world: where entrepreneurial companies are left relatively free to experiment with innovative new methods of developing and deploying technologies — particularly telecommunications technologies — consumers enjoy the largest increases in their standard of living.
The importance of humility in regulating highly innovative industries cannot be overstated. Even after decades of research, there is still much that economists cannot predict about the broad economic effects of technological innovation on economic growth and development. The unintended and unanticipated costs of preventing new methods of reaching underserved consumers can be substantial, and the consequences enormous to those in greatest need…”
“India is on the cusp of providing an economically and socially transformative service: near-ubiquitous, low-cost, high-value internet access that has the potential to create unprecedented opportunity and advantage for its citizens. The nation stands poised to increase the welfare of its poorest citizens with a rapidity seldom witnessed in human history. We strongly encourage TRAI to chart a wise course that allows for differentiated tariffs and the expanded internet access they can bring to India’s citizens.”
