American citizens like to complain about Washington, politicians and public policies. Along with baseball, criticizing government is a national pastime and the admission is far less expensive. Yet while many grievances are warranted, sometimes policymakers get it right and deserve praise. One of the best examples of thoughtful, bipartisan policies can be found in a provision of the Telecommunications Act of 1996, by which lawmakers wisely attempted to future-proof the bill.
This smart provision is known as forbearance. Congress realized that because the act itself would encourage rapid changes in technology, it was important to be sure the Federal Communications Commission’s rules and regulations would keep up.
Lawmakers acknowledged that competition would and should replace the need for regulations when they became outdated, particularly when new products based on emerging technologies began competing with each other. Innovators in such circumstances could request the FCC forbear from applying the outdated regulations. Congress even provided that petitions for forbearance would become effective if the FCC did not grant a petition within a time defined in the act.
This week the Internet Innovation Alliance, of which I am founding co-chair, made a filing to the FCC in support of a petition for forbearance filed by USTelecom. The petition relates to the market for Business Data Services. The BDS market — formerly the province of local incumbent carriers using slower, copper-based technologies — has quickly become a robustly competitive market in which companies compete to offer better service with faster speeds.
The past two decades have witnessed an explosion of innovation and deployment of new platforms and technologies such as advanced cable services, Ethernet products and a massive expansion of wireless technology. So the regulatory mandates for the old monopoly situation are no longer appropriate, and this is the grounds on which forbearance should be granted.
In the residential market, USTelecom notes that “only 11 percent of U.S. telephone households are projected to have” landline phone service from a traditional phone company by the end of the year — down from 16 percent as recently as 2016.
It’s not surprising that the BDS market would follow these trends, as business users often demand higher rates of performance and speed. And the FCC itself realizes that the BDS market has changed. As far back as 2015, the FCC had found that 491 facilities-based competitors participated in the BDS market, covering 99 percent of potential BDS customers. The competitive lines beyond the lines controlled by incumbent local exchange carriers were already in place for the overwhelming majority of buildings. More buildings were lit with new fiber in 2017 than in any previous year.
In short, virtually all American businesses have access to BDS. There is simply no justification for intrusive regulation in a market that, by the FCC’s own data, is working and competitive. And the regulatory mandates for which the petition seeks forbearance are related to outmoded TDM-based technologies that cannot work with 5G networks transmitting data at gigabit speeds.
Getting to nationwide 5G will take very high levels of private investment. So the continuing diversion of capital from investments in high-speed broadband makes no sense. By definition, a company may invest a dollar only once — either in lower-speed technologies or in next-generation services. Requiring investment in lower-speed services, therefore reduces the amount of investment available for investment in high-speed services that offer greater benefit to users of BDS. This result is bad policy and strengthens the case for forbearance.
In sharp contrast, policies that attract private capital to investment in high-speed broadband make very big economic contributions. The wireless industry accounts for $475 billion in economic effect, and every dollar of wireless investment is estimated to deliver $3.20 in economic effect.
All told, this shows the power of competition and technology to drive markets and innovation — precisely what one would expect in a dynamic, competitive market. Cable’s strong entry into the BDS market has led a shift to facilities-based competition. This transition to new technology, notably Ethernet, reflects what customers actually want. There should be no undue preference for older technologies that customers do not want and that will not meet the needs of businesses that use BDS.
Congress gave the FCC the power to get old regulations out of the way for entrepreneurs and innovators. It’s time for the FCC to use it.