Telecom experts question broadband regulation plan

US govt regulation may create investor uncertainty

The U.S. Federal Communications Commission's proposal to reclassify broadband as a common-carrier service will create uncertainty for investors in the telecom industry and could lead to heavy-handed regulations down the road, some telecom law experts said Thursday.

FCC Chairman Julius Genachowski announced a plan in May to reclassify broadband from a largely unregulated information service to a regulated common-carriers service. That announcement came about a month after the U.S. Court of Appeals for the District of Columbia Circuit ruled the FCC did not have the authority to enforce informal network neutrality principles against Comcast.

Even though Genachowski said the FCC would act to forebear from most common-carrier regulations under Title II of the Telecommunications Act, many participants in a Phoenix Center for Advanced Legal and Economic Public Policy Studies forum on broadband reclassification Thursday questioned whether the commission could stay away from additional regulations indefinitely.

The move to reclassify broadband will create many years of legal uncertainty because of likely challenges to the FCC's actions, said telecom lawyer Jonathan Nuechterlein, a partner at the Wilmer Hale law firm in Washington, D.C. "What the FCC is proposing to do here is create a lawyer's paradise," said Nuechterlein, a former deputy general counsel at the FCC. "They will send my kids to college and their kids to college."

But Chris Wright, a partner in the Wiltshire and Grannis law firm and former general counsel at the FCC, disagreed. While Genachowski's plan may not lead to immediate certainty for lawyers and investors, reclassifying broadband may give the FCC clearer legal authority than any attempts to continue to create broadband rules on a case-by-case basis, he said. The FCC, under its current limited authority, would probably "lose a lot" of legal cases when trying to implement its national broadband plan, released in March.

"It's a lawyer's paradise either way," Wright said. "There is uncertainty. There will be considerable uncertainty for a long time."

In June, the FCC moved to launch a notice of inquiry, or NOI, asking for public comment on the reclassification proposal. An NOI is a preliminary step toward creating new FCC policy. The agency would have to launch a lengthy rulemaking proceeding before reclassifying broadband as a regulated service.

Kathy Brown, senior vice president for public policy development and corporate responsibility at Verizon Communications, questioned why new regulations are needed. The FCC should be able to address consumer complaints about broadband providers on a case-by-case basis, she said.

"If there ever is a consumer group that keeps the fire to your feet, it is the Internet community," she said. "They don't let much get by them for very long."

When telecom carriers are investing billions of dollars in fiber-optic networks and 4G wireless broadband service, "it's insane" to be talking about new regulations, she said. The new regulations could change the way telecom carriers invest their money, she said.

"You're not going to see major carriers say, 'We're not investing anymore,' that's not how it happens," Brown said. "But decisions are made about where to put capital, because that capital has to have a return. We're in a very difficult economic environment, and difficult decisions have to be made."

The forum centered around a Phoenix Center paper, released last month, called the Broadband Credibility Gap. Authors Lawrence Spiwak and George Ford argue that the FCC's promise to take a light touch approach to broadband regulations isn't likely to hold up in the long run.

Many circumstances could unfold that lead the FCC to go back on its promise to forebear from most Title II regulation, the authors wrote. "One could say that the commission’s promise will ... be found to actually be inconsistent with the commission’s interests," the paper said.

It will be difficult for the FCC to convince private investors about how it will act in the future, the paper added. "Firms and investors make decisions based on their profitability, and this profitability depends on how they will be regulated going forward," the paper said. "Unless the regulator is able to take steps to assure investors it will behave favorably, though, society may suffer. Such assurances from regulators, by their own admission, are ephemeral in nature."

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