AT&T, Verizon stand against FCC's 'Third Way,' Sprint on the fence

With Congress' dance card already overflowing with major social and policy reforms, including in the financial sector, the likelihood that it could pass a major reform to the Telecommunications Act for Internet regulation during the Obama Administration (however long it lasts) is quite low. Faced with a pair of no-win scenarios, the FCC last week opted to propose a "Third Way" for broadband regulation that could at least get its foot back in the door -- a way that literally asks judges and attorneys-general to substitute "telephone" for "broadband" in various clauses of existing law, except for those sections where doing so wouldn't make any sense.

With major wireless Internet providers feeling they gain little or nothing by allowing the FCC to extend its regulatory ability, companies like Verizon, AT&T, and Comcast (which, after all, won that court decision last month) are fine with the status quo. But a statement from Sprint late last week was, by contrast with those of its competitors, so conciliatory and non-descript that it was interpreted by many industry watchers as outright support for FCC Chairman Julius Genachowski.

"While still reviewing the implications of the FCC's legal arguments, Sprint appreciates the FCC's statement that any regulation it may assert would be through a light regulatory touch," reads the official comment from Sprint SVP for Government Affairs Vonya McCann. "Sprint agrees the past decade has seen the rapid development of a competitive and innovative commercial mobile wireless communications marketplace under such a light regulatory touch. Sprint commends the FCC for the cautious approach it is taking toward this complex subject. The FCC can and should foster similar growth in broadband by focusing its energies on protecting consumers by promoting competition and placing checks and balances on providers with market power."

McCann's comment does contrast against that of her AT&T counterpart, SVP Jim Cicconi -- who, by the way, also directly challenged Chairman Genachowski's stated promise that his "Third Way" would not regulate the Internet. If you regulate the networks that make up the Internet, and if you have a hand in managing its content, Cicconi argued, then you're regulating the Internet.
"Make no mistake -- when it regulates the networks that comprise the Internet, the FCC is in fact, and for the first time, regulating the Internet itself," Cicconi wrote. "There is no statutory basis for doing so -- indeed it is directly contrary to Congress's stated intentions -- and is being done without any compelling evidence that would justify a reversal of the FCC's prior decisions on this issue. If the FCC follows through with the chairman's stated intent, it will have a direct impact on jobs and investment in one of the areas of the US economy that many hoped could help lead the recovery."

Verizon Executive Vice President of Public Affairs Tom Tauke sided with AT&T this time: "In enacting the 1996 Telecommunications Act, Congress intentionally excluded Internet services, like broadband Internet access, from the scope of Title II's regulatory burdens. Those regulations were designed for different services delivered by different networks in different times. We believe that the chairman's stated approach is legally unsupported. The regulatory and judicial proceedings that will ensue can only bring confusion and delay to the important work of continuing to build the nation's broadband future."

Sprint may be considering whether a strengthened FCC, should its "Third Way" pass legal review, would have the side-effect of balancing the field. Its next generation Internet agenda is represented by its majority stake in 4G service provider Clearwire. Earlier today, Clearwire CEO Bill Morrow confirmed to CNET's Marguerite Reardon that his firm will indeed give itself the option to employ LTE rather than the WiMAX system it supposedly championed, at least after 2012.

For now, Sprint's making moves to keep itself from becoming the entrenched minority player in the US market. Opening the door to LTE is one such move; leaving the door open to the FCC may be another.

On the opposite end of the spectrum entirely is the viewpoint that only Congress can solve this dilemma, if it can find a spare minute in-between arguing on the floor and campaigning at home. In a new white paper on the subject (PDF available here), Progress & Freedom Foundation senior fellow Barbara Esbin cites Verizon's Tauke specifically in pointing out what she perceives as the flaws in the FCC's new argument.
"Any attempt to simply 'relabel' the very same Internet access services, as some have suggested and the FCC now appears to be contemplating, and call them something else so that they can be regulated more pervasively under Title II [of the Telecommunications Act] would not sail through the courts unscathed," Esbin writes. "Rather, such a move would most likely be viewed as a highly contrived reinterpretation of the Act aimed solely at permitting the FCC to regulate the exact same Internet service that the DC Circuit said it couldn't regulate without any intervening authorization from Congress. This can hardly be considered as a sound legal basis."

With respect to what a completely rethought Telecommunications Act would look like, Esbin suggested that rather than creating some new title that defines Internet service as we know it today, only to pave the way for the next obsolete laws debate come 2020 or so, new legislative language should instead define what it means to serve customers, what rights those customers should have, and when those customers' rights are infringed...regardless of the service involved.

"If the Comcast decision teaches us anything, it is that the next Communications Act should not be structured so that all regulatory consequences flow from service and technology-specific definitional categories. It is impossible to foresee such categories even as they are upon us, as evidenced by the fact that the 1996 Act almost completely missed the significance of the Internet, now widely viewed as the single most important communications platform in the world," states Esbin. "If economic regulation is required to address marketplace problems, then competition theory and consumer protection should be its foundation, not service-specific categories. Rules should be developed as consistently as possible across platforms and providers, taking due account of technological differences. This is virtually impossible to do under today's Communications Act, but it should certainly form the basis for debate about the Communications Act of tomorrow."

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