How much of the net neutrality job will go to state regulators?

20 November 2014 by Steve Blum
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Whether or not the FCC decides to regulate broadband service as a common carrier utility, new net neutrality rules will be imposed, successfully or not. State utility regulators from across the country met in San Francisco this week. The California Public Utilities Commission hosted a conference on Internet regulation, and net neutrality in particular, chaired by commissioner Catherine Sandoval, yesterday afternoon.

A national panel of economics and law professors discussed where state regulators fit in. Not surprisingly, they didn’t agree.

Early on, mobile telecoms regulation was moved nearly completely to the federal level, resulting in “massive investment”, said Charles Davidson from the New York Law School. The same thing happened with broadband and “the result has been massive investment in broadband networks” along with deployment to most parts of the country. “Congress did not contemplate an active state role vis-à-vis broadband”, he concluded.

Mobile telecoms regulation is indeed a good model to follow, said Jim Tuthill from the U.C. Berkeley School of Law. But the lesson there is that mobile telecoms already fall under common carrier rules. “There’s an important role for the states under the regulatory regime of mobile services. Title II [common carrier] regulation of cellular hasn’t hurt investment, hasn’t hurt innovation” he said. “It worked for wireless, it’ll work for broadband”.

The premise for a higher level of state and federal broadband regulation is wrong, according to Michael Katz, from the U.C. Berkeley Economics Department. The debate over network neutrality is primarily a debate over whether some companies should be able to pay for Internet fast lanes to reach customers.

“Paying for better service does not, in and of itself, constitute price discrimination”, Katz said, pointing out that telling General Motors that it could only sell Cadillacs would hurt consumers. “It’s a good thing when different firms that are competing to serve customers go out and buy more expensive inputs to better serve customers”, he said. The answer, according to Katz, is not to try to create rules that will force companies to do or not do certain things, but use existing anti-trust law on a case by case basis to swat down anti-competitive behavior when it occurs.

The FCC’s original approach, using general authority to promote broadband under another section – 706, if you’re keeping score – of federal telecoms law is the better course, according to Christopher S. Yoo from the University of Pennsylvania Law School. Otherwise, big telecoms companies will have a huge advantage in a common carrier game, because “you have to have an army of lawyers to do it”. The original approach – assuming the commission can thread its way through court rulings – works because “network neutrality is a subsidy for the edge”, which incentivises companies to develop services that will attract new users to the Internet. “The rationale is that anything that promotes usage is within the power of 706”, which puts it under state authority, Yoo said. The role of states, he said, is pushing efforts such as broadband mapping studies and data collection, implementing universal service, promoting education and usage as envisaged in the national and state broadband plans and reducing switching costs for consumers.

It was a good discussion of the different regulatory tools in states’ broadband development kit. And the more options, the better, as Sunne Wright McPeak, CEO of the California Emerging Technology Fund, told the group.

“The solution is not a silver bullet, but silver shotgun pellets”, she said.