October 23, 2015
There are troubling signals that the FCC is gearing up to further increase regulation of cable — on top of the extra-legal new utility regulation the FCC already did in its 2015 Open Internet Order.
What is profoundly troubling is the abject illegitimacy of their premise for more regulation of cable, i.e. the FCC’s new arbitrary and capricious definition of broadband that illegitimately redefined long-recognized, strong broadband competition — out of existence with the stroke of a pen.
So what are the signals of more cable regulation? Two speeches from the FCC Chairman, one from the FCC General Counsel, another from the DOJ Antitrust Chief, a variety of Hill and edge-industry entreaties to regulate cable more via new MVPD or ALLVID regulatory proceedings, (but of course without regulating favored edge providers), and an explosion of new opposition to the proposed Charter-Time-Warner merger (by the exact same cast of characters whose opposition doomed the Comcast-Time-Warner merger).
This broad simultaneous level of focused regulatory chatter and organized activity is not coincidental, but highly-orchestrated and abjectly illegitimate.
Why is more cable regulation abjectly illegitimate?
The FCC’s whole regulatory, legal and PR case for more cable regulation and blocking of cable mergers is built entirely upon an obviously arbitrary and capricious redefinition of broadband that has an implicit political purpose of enabling a PR demonization narrative that cable broadband is a “bottleneck” and an implied monopoly in three quarters of the nation.
Some background is warranted. Near the end of the FCC’s review of the Comcast-Time-Warner merger, and just four weeks before the FCC voted on its Open Internet Order, the FCC radically and arbitrarily changed the main-tent-pole-standard against which both decisions would be measured, without any effective opportunity for those affected to challenge the arbitrariness and capriciousness of this new “standard” in court.
The FCC transformed their main-tent-pole-standard, the definition of broadband by an astounding 525%, from 4 Mbps to 25 Mbps downstream (when the national average was only 10.5 Mbps). In doing so, the FCC presented scant factual or merit-based reasons for this redefinition, only a policy and PR rationale that the 25Mbps should be the new “table stakes” for broadband competition.
Simply, the FCC did not base this competition standard objectively on what the average consumer uses, needs, or is willing to pay for, only what the FCC subjectively believes consumers should have in the FCC’s vision of a perfect broadband world.
Tellingly, under that subjective and aspirational FCC justification, the FCC could have justified changing its competition standard for broadband by 25,000% to one Gigabit downstream and upstream, because that was Google Fiber’s new competitive “table stakes” in about a half percent of America, and that is what the FCC subjectively is pushing municipal Government-Owned Networks to build, in contravention to state laws, in order to supplant privately-owned broadband networks.
It is also telling that both the FCC and DOJ like referring to this new broadband competition standard as “table stakes,” which is well-known as a subjective gambling concept, not an objective legal standard defensible in court.
Using the ever-evolving and subjective “table stakes” concept as a competition standard is an awfully lot like the arbitrariness and capriciousness one can suffer from driving through a remote small town which abruptly changes the speed limit and operates under kangaroo court justice, because that remote town is confident they are effectively cop, judge and jury all in one – and the unwitting traveler is effectively entrapped in their “jurisdiction” with no practical opportunity to appeal.
As for the DOJ, it would never want to defend such a subjective, arbitrary and capricious competition/antitrust standard in federal court because it couldn’t withstand the rule of reason let alone the laugh test. If they tried, any respectable appellate judge could either scream or laugh them out of their courtroom for trying to defend such an outrageously unfair and unjust “standard” in a federal court of law.
In addition, this end- result-driven standard was set obviously so that the FCC could exclude from the broadband market four national wireless broadband providers: Verizon, AT&T, T-Mobile and Sprint, which each offered 5-10+ Mbps of broadband service to consumers; and thus deny that wireless broadband was a competitor to wireline cable broadband.
The FCC also apparently rigged this competition definition process to deny any effective due process opportunity to legally challenge it in a court of law.
The FCC’s Broadband Competition Standard is also Ridiculous and Absurd
The FCC knows full well that the nearly three-quarters of Americans who use a smartphone know that one can functionally do most everything one wants on a mobile smartphone/tablet/laptop that one can do on wireline broadband.
It is ridiculous and absurd that the FCC ignored the fact that a couple of hundred million Americans routinely use only wireless broadband for all their Internet needs when they are away physically away from their home or work desktop or TV.
It is ridiculous and absurd for the FCC to rule that what over two hundred million Americans use every day in streaming video, shopping, doing work or homework, on a tablet, laptop, or smartphone — is somehow not broadband!
It is ridiculous and absurd that the FCC ruled wireless broadband could not compete with broadband when for over two decades the FCC has recognized that wireless DBS (DirecTV & Dish) has been the major competitor to wireline cable — taking roughly two-fifths of cable market. And for over a decade the FCC’s own competition reports routinely have tracked and recorded that wireless is a video and broadband competitor to cable.
It is ridiculous and absurd for the FCC to effectively argue that wireless broadband does not compete with wireline broadband when: 1) Comcast and other cable companies have exercised their contractual rights to resell Verizon’s wireless broadband service to compete with telco and wireless broadband competitors; 2) AT&T-DirecTV is offering wirelessly most everything that a wireline broadband provider offers; and 3) Verizon, Amazon, Google, Microsoft, Hulu, Netflix, etc. are increasingly offering their own cable-like, video streaming offerings wirelessly.
The FCC’s policy stance here, that wireless broadband doesn’t compete with wireline broadband, is ridiculous, absurd and utterly indefensible on the facts and merits — if it ever could get before a court of law.
In sum, more FCC cable regulation would be abjectly illegitimate because it is entirely dependent on the FCC’s arbitrary and capricious broadband competition standard of 25Mbps that was designed entirely with ends-justify-the-means thinking, in order to exclude wireless broadband competition from the market and to manufacture a rigged monopoly broadband PR frame to justify utility and monopoly regulation of broadband and cable.
Finally, the FCC adds insult to the injury of this ridiculous and absurd travesty of justice, by perpetrating a capricious and fraudulent bait-and-switch here.
For over a decade the FCC baited cable and other broadband providers to prove that the broadband market was competitive by investing hundreds of billions of dollars in much faster broadband networks. When cable and other broadband providers did exactly what the FCC wanted, the FCC then arbitrarily switched the rules of the game and punished them for their FCC compliance and good deeds.
How has the FCC so lost its way?
Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, a research consultancy for Fortune 500 companies, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests.