The framers of our great Constitution realized that unifying thirteen newly independent colonies meant promoting the one concept over which there was no dispute–the growth of interstate commerce. The sizes, economic bases, and existence of institutionalized slavery naturally created differences amongst the colonies but there was no doubt that promoting the commercial interests of the colonies and their citizens was the path to a more perfect union.
Government has left that path. Yes, the current administration pays obligatory lip service to the importance of commerce, but its actions, along with the actions of the agency heads selected by the administration, send a different message. As far as the administration is concerned, regulation is supposed to be the prime incubator of innovation and the best generator of job growth.
One example of the preference for government intervention gone mad is the proposal by the Federal Communications Commission to implement by rule the policy of network neutrality. Network neutrality requires that a broadband access provider, such as AT&T or Comcast, treat traffic from all content providers in the same manner.
To borrow an example from Mike Mandel‘s policy memo, “The Coming Communications Boom?”, it’s like charging everyone the same price for an airline ticket from Atlanta to Baltimore even though passengers are leaving at different times of the day or on different days altogether. Worse yet, imagine if everyone showed up to the gate at the same time, demanding to get on the 6:30 am flight. The concept of network neutrality says that each passenger would have to be put on the plane at the same price.
So, in addition to not being able to discriminate on price, network neutrality provides a disincentive to deploy more facilities. If I am unable to address congestion by offering business class, first class, and economy class without recovering the costs through price, then I have no incentive to pay for more gates, obtain permission to fly into additional airports, or hire any additional personnel.
Unfortunately, we cannot wish away regulation. Our Constitution requires that government regulate commerce, but given that growth in gross domestic product has been below historical trends for the past three years and unemployment is at 9.5%, there must be a way to reconcile the necessity of regulation with the need to spur growth in our economy.
One way to that would be to reintroduce the market failure test proposed by the Bush administration and combine that with the presumption of competition approach proposed by Senator Jim DeMint in the Freedom for Consumer Choice Act. Before imposing any new regulations on broadband access, the FCC should be required to show that the market for broadband access has failed. The FCC’s approach would be similar to the Federal Trade Commission, where it would use a market-based, anti-trust style framework using unfair competition as the standard. I would add to that standard a consumer protection component where, on a case-by-case basis, the FCC would also make a determination that a consumer of information services such as broadband access was the victim of fraud or other anti-consumer behavior.
There will be the need to coordinate jurisdictional responsibilities between the FCC and the FTC, but this is nothing new or unusual given that the FTC and Department of Justice already coordinate on antitrust issues. There would be no need to pass new consumer protection or antitrust legislation. The Federal Trade Act, Clayton Act, and Sherman Act are sufficient. The FCC can use the federal district courts, just like the FTC and DOJ currently do, to bring complaints regarding market abuses and enter into settlements, all in one fell swoop.
If the FCC is serious about developing a robust broadband market, it should let the private sector continue to deliver broadband to consumers in the way it has for the past decade. Let our current statutes and court system address abuses on a case-by-case basis when they actually occur.