No Quick, Easy Fix Seen in Broadband Reclassification Negotiations
Regulators’ negotiations with industry over broadband reclassification probably will be long and slow, economists and analysts said in interviews. Meanwhile, a third meeting between Hill staffers and industry representatives Friday took up various spectrum policy matters (CD July 16 p9) that could require a rewrite of the Telecom Act, officials said.
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The Hill meeting, centered on wireless, involved 30 executives of broadcasters, wireless carriers, manufacturers, backhaul providers and public safety and public interest groups. Those represented were CTIA, NAB, APCO, AT&T, Verizon, Sprint Nextel, T-Mobile, Leap, MetroPCS, U.S. Cellular, Clearwire, 3G Americas, Qualcomm, FiberTower, MSTV, Univision, Google, Intel, Microsoft, the Satellite Industry Association, the Association of Public Television Stations, the Wireless Communications Association, the Rural Cellular Association, the Telecommunications Industry Association, Shared Spectrum, Navigant Economics, the Brattle Group, Free Press, the New America Foundation and the Public Interest Spectrum Coalition.
Any hope of a quick and easy fix isn’t realistic, said Craig Moffett of Bernstein Research. And a new Telecom Act overhaul may not be a high legislative priority, said Mike Mandel of the Wharton School’s Mack Center for Technological Innovation. He said he would be surprised to see major progress come out of the meetings. The Obama Administration has other policy priorities, like health care and the financial industry revamp, he said. The main question is what is the best regulatory set-up to promote innovation and job creation, Mandel said. That goes beyond net neutrality, he said.
The talks are a way for the key players to hedge their risk in the reclassification debate, said Paul Gallant, a Concept Capital analyst. “Everyone has a lot at stake, including the commission, so people want to explore whether it makes sense to take worst-case outcomes off the table with some type of legislative compromise,” he said. “If agreement were reached on some type of narrow legislation, it would probably center on net neutrality.” Investors hate the regulatory uncertainty more than anything, said Tim Seitz of Height Analytics. They worry about the effects of the FCC moving forward with broadband reclassification under Title II, but they're confident that nothing will get done soon, he said. The regulatory hurdle for net neutrality stands in the way, said Everett Ehrlich, ESC president.
The analysts and economists said the government should back off a bit. “You want to have minimal amount of regulation if you want to encourage innovation,” Mandel said. Innovation and its ecosystem are very delicate, he said. “It’s easier for the government to kill innovation then to encourage it,” Mandel said. The best way to do that is to maintain the light touch of Title I, said Hal Singer of Navigant Economics. Meanwhile, independent content providers need assurance they won’t be discriminated against in accessing broadband subscribers or buying enhanced quality of service from ISPs, he said. The best way to do that is to “use the basic principles animating antitrust law to fill in the content of the case-by-case analysis,” as explained by Professor Christopher Yoo of the University of Pennsylvania Law School, Singer said.
It looks like the FCC’s closed-door meetings are really about its ability to enforce net neutrality principles, said Jonathan Chaplin of Credit Suisse. The commission and industry groups seemed to be hashing out an agreement on net neutrality that gives the FCC the ability to enforce the principles without the unintended consequences, he said. An agreement could allow the FCC to prevent discriminatory conduct that’s unjust and unreasonable, Chaplin said: “From what we are hearing, the key parties involved seemed to be reaching a consensus around the core issues."
But there are complications, Chaplin said. It’s unclear how the FCC could turn an agreement with the industry into a set of rules, he said. And some consumer advocates won’t go along with any kind of discrimination, Chaplin said. If negotiation fails and broadband reclassification is the only option, investors would be downbeat, he said.
Regarding the administration’s plan to free 500 MHz of spectrum, the experts said additional capacity is good for the market. Effects on investment will depend on the final rules and who can get the spectrum, they said.