National Regulation

McSlarrow, Tauke: There Is Room for Regulation in Internet Space

3/20/2012 3:32 PM Eastern

Comcast/NBCU Washington president Kyle McSlarrow and Verizon executive vice president Tom Tauke were in agreement Tuesday that some regulation in the Internet space was needed, but that it would need to be narrowly targeted, consumer focused -- on issues like privacy and security -- and only in response to demonstrable harms.

They also said any such regulaations would need to be served up with more than a pinch of regulatory humility and a recognition that events and technology move too fast to be imprisoned in the amber of an old regulatory model.

That came in a Free State Foundation panel session Tuesday on competition, regulation and the Internet.

McSlarrow provided a Clint Eastwood view of regulation, with the good and the bad that could produce some ugly results.

The good was that there were "accomplished, professional staff trying to do the right thing." The bad was the regulatory structure that they inherited, including an "extraordinarily vague" public-interest standard and a 1996 Telecommunications Act rewrite in which cable, eventually the first entity to deploy residential broadband, was an afterthought amidst telco-centric regs. The good would also be rules that were clear, simple, easily understood and telling them exactly what they need to do and conform to.

Saying he wanted to avoid having to file an ex parte notice, McSlarrow said he was not talking about any deals his company may have before the commission [Verizon's purchase of SpectrumCo spectrum in which Comcast is a principal partner] or have been in the past [Comcast's purchase of NBCU]. But he said the public interest standard put too much discretion in the hands of the regulators and wasn't fair either to them or industry.

While the Justice Department looks at deals for their effect on antitrust issues, the FCC goes beyond that to a public interest determination on any deals that involve the transfer of FCC licenses.

Another example of the "bad" in regulation was indecency, he said, where there have been eight years of litigation of cases that "had no effect on the culture." He broadened that to looking at content in general, which he called a "rathole" that the regulator can never escape. Down that rathole he suggested were program access and carriage rules that he said may have made sense in 1992, but no longer do. Tauke pointed to regs targeted to scarcity and monopoly, neither of which he suggested defined the present, much less the future.

McSlarrow also talked about the "sheer capriciousness" of how rules were applied to certain actors and not others. He cited as an example the fact that cable operators are the only delivery system around that can't encrypt -- the FCC is currently considering whether to life the ban on cable's encryption of digital basic.

He suggested that anticipatory regulations wind up being produced by good people making decisions based on wrong assumptions.

Both McSlarrow and Tauke said that given that broadband has now become such a consumer-centric technology, there was definitely a consumer protection role for government. "It cannot be a lawless space," said Tauke. But that does not mean a lot of anticipatory regulations, he said, that attempt to anticipate how services are delivered, an effort the government historically has gotten wrong, he suggested, and could get wrong on steroids at the speed of digital change.

He gave a shout out for the Commerce Department's just released Consumer Bill of Rights on privacy, saying that was "probably" a good model.

"The bottom line," said Tauke,"as we look for a new governance model for protecting consumers, there is a role for government," but he added that would require statutory reform. His four-point plan for that reform would be: 1) Reform must be at the federal level. "We cannot continue to have state-by-state regulation of this space," he said, and a more coherent international policy, though he said what was happening now is working "pretty well"; 2) Only a single agency at the federal level should oversee the Internet space; 3) There should be a "demonstrable harm" test for government intervention. If there is fraud, the government should intervene, if there is anticompetitive activity, the government should intervene; 4) Use the Internet governance model "where feasible."

He pointed out such a model is not unique to the Internet, he said, pointing to the Federal Trade Commission's regulation of advertising. "The FTC does not spell out all the do's and don'ts of advertising. They rely on the advertising industry to establish standards. Then the FTC looks at the standards to determine whether actions are appropriate or not."

FCC Wireless Bureau Chief Rick Kaplan agreed with McSlarrow and Tauke that competition is the best regulator of the marketplace, but that when there isn't sufficient competition or something is not working in that marketplace, that is when the FCC needs to step in. He put in a plug for regulatory humility, saying regulators first need to know what they don't know.

He also said that freeing up more wireless spectrum would take care of some competition issues as well, putting in a plug for the incentive auctions his bureau is currently working on organizing. He was asked why, if the here was a spectrum crunch, why it was going to take two years to hold a spectrum auction or six months so far to approve Verizon's deal to purchase fallow cable spectrum and use it for mobile wireless.

Kaplan said he could not comment on the transaction, since it was currently being vetted. He did say that the FCC needed time to solicit comment and there was a lot to think through. And while he said he said again he could not comment specifically about the Verizon-SpectrumCo deal, he did say one consideration in transactions is when spectrum is going to be used. "In other words, we have people come and say: 'We really need this spectrum, and we really need it in 2014." In that case, he said, "six months may not be so bad."

As for auctions, Kaplan said it was a very complex matter but that FCC Chairman Julius Genchowski had signaled he wanted the bureau to get going on it and move as quickly as it can. Panelist Michelle Connolly, Duke economics professor and former FCC chief economist under chairman Kevin Martin, said she thought it was better that the FCC take its time and get it right than to move quickly and get it wrong. "I agree with Rick. Realistically, this is such valuable spectrum that the worst thing you can do is set up some rules, auction it off and have it be permanently invalidated."

She agreed with Kaplan that it was a complex undertaking-the first ever FCC reverse auction-and that it was better to get it done correctly as opposed to quickly.

June