LouAnn Lofton *

Senators and Representatives alike are bearing the torch for broadband access to the Internet through the hallowed halls of the Hill. Broadband includes digital technologies that offer consumers access to voice, high-speed data, video, and interactive information, and analog transmission techniques for data or video that offer multiple channels. Increasingly, Internet content is becoming more complex and more visual, colorful, and mobile. This trend will undoubtedly continue. High-capacity access to this new content will soon feel like a necessity.

The issue of broadband Internet access is in the forefront of legislators' minds because of two developments. First, incumbent local exchange carriers (ILECs) have been deterred from investing the necessary capital to build asymmetric digital subscriber lines (ADSL), their high-speed Internet access offering, to most areas of the country—especially to rural areas. One factor is Section 251, which the FCC threatens to apply in a way that would require ILECs to make all their broadband facilities available to their competitors as unbundled network elements. Another factor is Section 271, which requires the former Bell Operating Companies get prior approval by the FCC to provide data transmission or voice transmission services across LATA boundaries. Legislators hope to encourage ILECs to build out of high-speed Internet access, even in remote areas.

The second red flag to legislators was AT&T's announcement of its intentions to get into the cable business by buying cable heavyweight TCI. AT&T is also completing a buyout of MediaOne, another large cable company. Upon completion of the MediaOne deal, AT&T will unseat Time Warner as the nation's largest provider of cable services. AT&T hopes to offer local and long distance phone service, high-speed Internet access, and cable television service together, as a package—bypassing local phone companies. Legislators became nervous as it became apparent that AT&T might not offer ISPs like AOL high-speed Internet access unbundled from content. AT&T will sell Internet access to customers through its 40-percent-controlled subsidiary Excite @Home. Unless a deal is cut between AOL and AT&T, a subscriber to AT&Ts high-speed cable access would pay for AOL service on top of the AT&T charge for hook-up and @Home content.

This article describes the two bills currently in the Senate dealing with broadband access, and the three bills in the House covering the same issue. All five bills would amend Section 251 of the '96 Act to encourage the investment in and rollout of ADSL by the ILECs (the bills vary with respect to the details of these amendments). Each bill carefully liberalizes Sections 251 or 271 of the '96 Act only for high-speed data services _ nothing in these bills loosens any regulation for the ILECs with regard to voice-only. Only the three House bills specifically address the issue of cable open access.

The Broadband Regulatory Relief Act (S. 877)

In the Senate, the Broadband Internet Regulatory Relief Act (S. 877) is sponsored by Sen. Sam Brownback (R-KS), and cosponsored by Sen. Don Nickles (R-OK) and Sen. Larry Craig (R-ID). S. 877 offers Section 251 relief to ILECs that make 70 percent of their local loops ready for broadband access. Also, in markets where the ILEC has a competitor for broadband Internet access, the bill strips the FCC of any power to regulate "prices, terms, and conditions" of such access. Where there is no competition in the broadband access market, the ILECs will be granted pricing flexibility. S 877 was introduced in the Senate on April 26, 1999.

The Internet Regulatory Freedom Act (S. 1043)

The second Senate bill is the Internet Regulatory Freedom Act (S. 1043), sponsored by Sen. John McCain (R-AZ). S. 1043 addresses the regulatory problems of Section 251 in three short pages. This bill's statement of policy reads as follows: "Since Internet services are inherently interstate in nature, it is the policy of the United States to assure that all Americans have the opportunity to benefit from access to advanced Internet services at affordable rates by eliminating regulation that impedes the competitive deployment of advanced broadband data networks."

Sen. McCain then goes on to do just that. His bill simply makes Sections 251 and 271 of the '96 Act inapplicable to Internet data services (as opposed to traditional telephony or voice-only). The bill also limits the FCC's authority along the same lines. McCain's bill doesn't place an "acceptable level" on ADSL rollout by the ILECs before the regulations are relaxed, as does S. 877 with its 70 percent requirement. The bill was introduced in the Senate on May 13, 1999.

The Internet Growth and Development Act (H.R. 1685) and the Internet Freedom Act (H.R. 1685)

In the House, H.R. 1685, the Internet Growth and Development Act, is sponsored by Rep. Rick Boucher (D-VA), and cosponsored by Rep. Bob Goodlatte (R-VA). This expansive bill addresses several topics, including digital signatures, spam, and online privacy, as well as broadband access. The Internet Freedom Act (H.R. 1686), is sponsored by Rep. Goodlatte and cosponsored by Rep. Boucher . It is a stripped-down version of H.R. 1685, addressing only broadband access, but using the same language as H.R. 1685. Both H.R. 1685 and H.R. 1686 were introduced in the House on May 5, 1999.

These bills would require ILECs to develop a plan for broadband access investment, development, and rollout, where such service is "economically reasonable and technologically feasible", within 180 days of the bill's passage, to be submitted to state public utility commissions. Upon approval of the plan by the relevant state commission, the ILEC would then be obligated to stick to the plan. Under the bill, the ILEC must follow its approved plan until the state commission makes the determination that either the ILEC has a competitor in the market for broadband access, or has made broadband services available to over 70 percent its service area. At that time, the ILEC is released from the obligation to follow its plan. The FCC has no authority over the process_it is left entirely up to the state commission.

To be freed of the obligations of Section 251, the ILEC must prove three things to the state commission. First, it must show that in those central offices where the local loops have been readied for broadband, the ILEC provided such loops to other carriers at least as quickly as it did to its own customers. Secondly, the ILEC must demonstrate that in central offices where the local loops are not yet ready for broadband services, but where such services are "economically reasonable and technologically feasible", the ILEC will provide such loops within 120 days of a request for such broadband-ready loops from another carrier. Finally, should an ILEC and another carrier disagree about the price, terms, or conditions for the broadband-ready local loops, the disagreement will be settled by commercial arbitration. The arbitrator would then establish prices based on the cost of the loops and the costs for conditioning the loops for broadband, plus a "reasonable" profit for the ILEC.

Title V of H.R. 1685 (Title I of H.R. 1686) lays out prohibitions on anti-competitive behavior. An ILEC that has "willfully and knowingly failed to provide conditioned unbundled local loops when economically reasonable and technically feasible. . . or restrains unreasonably the ability of a carrier to compete in its provision of broadband services over a local loop" will be in violation of the Sherman Act. The same applies to a "broadband access transport provider" (BATPs, or in other words, a cable operator offering Internet access) with market power that has "offered access to a service provider on terms and conditions, other than terms justified by demonstrable cost differentials, that are less favorable than those offered by such operator itself, to an affiliated service provider, or to another service provider…". The bill also grants ISPs a civil right of action against "discriminatory" BATPs.

The Internet Freedom and Broadband Deployment Act (H.R. 2420)

The final bill dealing with broadband Internet access is H.R. 2420, the Internet Freedom and Broadband Deployment Act. H.R. 2420 is sponsored by Rep. Billy Tauzin (R-LA), and has 32 cosponsors from both parties. This bill lays out a short history of the debate over broadband access versus Sections 251 and 271 of the '96 Act. The bill was introduced in the House on July 1, 1999.

The bill would remove the FCC's authority over high-speed access or data information flows, and the authority of state and local commissions. Interestingly, the bill goes on to say, "Nothing in this section shall be construed to … affect the rights of cable franchise authorities to establish requirements that are otherwise consistent with this Act." This leaves a door open for local cable franchise authorities to make "open access" a pre-requisite for AT&T taking over TCI's, and eventually MediaOne's, cable customers and franchises, as has been done in Portland, Oregon, and Broward County, Florida.

H.R. 2420 offers complete relief from Section 251 for high-speed data services, and it lifts the LATA boundary requirements in Section 271 for data services. Both sections remain in effect for voice-only service.

The bill would require ILECs to provide three things to preserve the consumer's freedom of choice with regard to Internet access—essentially requiring the ILEC to interconnect with ISPs. First, ILECs must provide Internet users with the ability to access and use any ISP they wish that is connected to the ILEC's high-speed data network. Next, the ILECs must offer any ISP the right to acquire the facilities and services necessary to provide Internet access over the ILEC's high-speed data services. Lastly, the ILECs must allow any ISP to collocate equipment in accordance with the requirements of Section 251 as needed to achieve the first and second objectives above, and to preserve freedom of choice.

Markey Proposal

Rep. Ed Markey (D-MA) has also announced legislation addressing broadband and open access. As of this writing, Markey's bill is not yet out. Indications are that it will require regulators to look at cable Internet access as a telecommunications service, and therefore will require cable companies to give unaffiliated ISPs access to their high-speed networks.

* LouAnn Lofton is a researcher at the Cato Institute.

Handicapped Access and The Internet's Regulatory Double Standard
Ananda Gupta *

The call for Internet regulation in a variety of forms has reached a record pitch. The high-profile issues—censorship of "bomb-making information," new rules governing consumer privacy—are still with us. But another regulatory offensive has snuck onto the radar screen: disability access rules. If the regulators have their way, sites that do business with the government will suffer a host of new rules, including bans on audio without accompanying text, restrictions on site designs (such as simple tables and charts) that inhibit Braille translation technology, and others. These rules are being developed by the Architectural and Transportation Barriers Compliance Board, aka the "Access Board," the little agency that spawned many of the horror-story rules associated with the Americans with Disabilities Act.

The new rules include prohibitions on web site designs that are difficult for Braille terminals to process (such as tables, forms, and frames), color contrast rules, and requirements for text transcripts of all audio and images on a site. The rules have their origin in Section 508 of the 1998 Workforce Investment Act. Section 508 admittedly does not apply to the private sector writ large, and the Access Board assures the curious and the suspicious that only private agencies contracting with the government will have to comply. Yet Section 508 states that all information technology "used by the Federal government" falls under its jurisdiction. It's not clear what that means. If a government employee uses Yahoo to do some research, does Yahoo count as being "used by" the Feds? This slope isn't just slippery . . . it's more like frictionless.

The regulators' proffered rationale for Section 508 is fascinating and chilling. A spokeswoman for the President's Committee on Employment of People with Disabilities told ZDNet that the federal government can safely assert its authority over the Net without doing so over the print medium. Why? The Internet was originally funded by the Pentagon and hence is subject to oversight in ways other media are not. In her words, "The Internet is subject to market forces, but it didn't start through market forces—it was started by the government."

This argument is akin to claiming that Ford Motors can impose its designs and logo on all automobiles since it held the original patent and funded the first mass-produced cars, or that the Wright Brothers' estate might be able to similarly impose its will on Boeing. It essentially boils down to an assertion that, contrary to all appearances, the Internet is government property. In practice, of course, government regulates all sorts of things that are not its property—yet only by suggesting that the Net is literally government property can regulators avoid the uncomfortable admission that the print media would be subject to similar rules and "regulatory discretion."

But to empire-building bureaucrats, the Internet is only worth regulating precisely because it is not government property. It is the product of individuals acting spontaneously yet in concert, and exploded onto the American cultural and economic scene in ways preceded only by the Industrial Revolution and unprecedented otherwise. Government enterprises and five-year plans, as a general rule, don't do that (or at least, not in a way that leads to prosperity rather than trials). If the Internet had suffered under the thumb of government attorneys since its inception, the disabled wouldn't be using it at all, since no one else would either.

* Ananda Gupta is a researcher at the Competitive Enterprise Institute. This article is reproduced with permission; it first appeared on June 11, 1999 as a C:\SPIN, one in a series of electronic commentaries produced by CEI.

FCC Reform: What's on the Table?
Solveig Singleton *

The recognition of the potential for competition in telecommunications means that telecommunications can become a market like any other market, governed by the general laws that apply to all businesses, and disciplined by competition. This would mean the elimination of the FCC, after a transition—the ultimate reform. Even those who would never go so far, though, are concerned with modernizing and streamlining the FCC, or with mechanisms to make the agency more responsive to Congressional intent.

Thus the House Telecommunications Subcommittee has created a task force to focus on broad reforms of the Federal Communications Commission, a task force to be chaired by Rep. Paul E. Gillmor (R.-Ohio). This article offers an outline of significant reform proposals likely to come before the task force, and a list of articles on the subject.

Eliminating Duplicative Functions

Among the proposed reforms are reforms that would eliminate functions performed by other federal agencies, including:

• The FCC's authority to review mergers. The FCC reviews often duplicate the reviews of the Department of Justice. 47 U.S.C. §310(d) stipulates the transfer of a communications licensees may go forward only "upon finding by the Commission that the public interest, convenience, and necessity will be served thereby." Key reform proposals include setting a time limit on FCC review (the Hart-Scott-Rodino Act requires the DOJ to complete its review of some mergers within 30 to 50 days). Another option is to revise 47 U.S.C. §310 (d) to permit license transfers without review, or to place the burden of proof on opponents of the merger (that is, presume that mergers are in the public interest). Others would eliminate the FCC's review entirely.
  
  
• The FCC's review of competition issues in broadcasting ownership decisions. Broadcast competition issues can also be regulated by DOJ. (Section 202(h) of the 1996 Act requires the FCC to examine broadcast ownership rules as part of the biannual review).
  
  
• The FCC's role in regulating consumer protection and deceptive billing and advertising; on the grounds that consumer protection is not only enhanced by competitive markets, but provided by the FTC. The FCC and the FTC currently have an agreement under which the FCC is to regulate deceptive advertising in "all media."
  
  
• The FCC's Office of Workplace Diversity. This office advises the commission on affirmative action issues and enforces civil rights laws relating to employees and applicants. In its enforcement capacity, the office duplicates the work of the Equal Employment Opportunity Commission.

Restructuring and Streamlining

Many reform proposals have been put forward that would streamline or modernize the FCC. These include:

• Folding the Cable Services Bureau into the Mass Media Bureau.
  
  
• Return of mass media licensees, such as Direct Broadcast Satellite operators (DBS), to the Mass Media Bureau from the International Bureau.
  
  
• Return regulation of access charges and pole and conduit access to the states.
  
  
• Delegating to the states the distribution of universal service funds.

Another idea would be to abandon the FCC's market or technology-oriented structures, such as the Common Carrier or Wireless bureaus. The FCC could be reorganized along functional lines, with new divisions to cover consumer matters (e.g. slamming), communications services (pricing, auctions, universal service), infrastructure and technology issues (spectrum enforcement, broadband deployment, interconnection), and enforcement.

From the standpoint of traditional values of American governance, perhaps the most significant reform proposals are those that would separate enforcement from rulemaking functions—Separation of Powers issues. Harold Furtchgott-Roth has noted that it is never clear whether "public interest" proceedings are enforcement or rulemaking. In many cases, the FCC is both lawmaker and judge of its own authority—a circumstance likely to result in consistent growth of the agency's power.

Substantive Reforms

The literature on FCC reform includes many proposals that go beyond structural or process reforms to strike at the heart of the agency's substantive powers. For the moment, structural proposals that would streamline the agency or eliminate functions performed by other federal agencies are more likely to move forward. But structural changes will not alter the fact that the agency enjoys very broad discretionary powers, and these powers are at the root of many problems that have arisen there.

Key substantive reform proposals include:

• Eliminating all tariffing.
  
  
• Removing the FCC's authority to regulate content. For example, Congress might stipulate that the FCC may not regulate advertising (e.g. alcohol advertising) unless specifically directed to do so by Congress. Repeal of the remaining editorial fairness and access rules has also been recommended.
  
  
• Eliminating the FCC's authority to set technical standards, as with HDTV.
  
  
• Redefining the "public interest" standard. One idea is to define the public interest as that which cost-benefit analysis shows is most likely to benefit consumers. The default position would be to presume that new entry is in the public interest, because it increases competition. Consistent with this is a proposal to eliminate the Section 214 requirement that FCC approval be obtained before new facilities are constructed.
  
  
• Establishing full property rights and markets in wireless spectrum. One of the more interesting substantive reform proposals would expand the FCC's authority to forbear from regulation under 47 U.S.C. §160, or to review rules as entry barriers under 47 U.S.C. 47 U.S.C. §161. Presently, neither "forbearance" nor "entry barrier" reviews apply to mass media regulations (with the exception of broadcast cross-ownership rules). These provisions would give the FCC very broad discretion to proceed with deregulation on its own initiative. But such initiative seems for the moment to be lacking; specific direction from Congress might be required for deregulation to proceed. Along those lines, some reform proposals also recommend adding sunset dates to certain regulations.

* Solveig Singleton is director of information studies at the Cato Institute.

FCC Reform Bibliography

John W. Berresford, The Future of the FCC: Promote Competition, Then Turn Out the Lights? (Washington, D.C.: The Economic Strategy Institute, 1997).

Robert Corn-Revere, Mass Media Regulation and the FCC: An Agenda for Reform (Washington, D.C.: Citizens for a Sound Economy, 1997) (available at http://www.cse.org/cse/pubs.html).

Thomas Duesterberg and Kenneth Gordon, "Hundt's Departure Could Herald Minimal FCC Role," The Wall Street Journal, May 30, 1997 (available at http://www.hudson.org/fore5-97.htm).

Jeffrey Eisenach, "Time to Give Up Merger Authority," Progress and Freedom Foundation New Release, June 11, 1999 (available at http://www.pff.org/JAE_at _FCC_forum_990611.htm).

Kenneth Gordon and Paul Vasington, The FCC's Common Carrier Bureau: An Agenda for Reform (Washington, D.C.: Citizens for a Sound Economy, 1997) (available at http://www.cse.org/cse/pubs.html).

George A. Keyworth, II, Jeffrey Eisenach, Thomas Lenard, David E. Colton, Esq., The Telecom Revolution — An American Opportunity (Washington, DC: The Progress and Freedom Foundation, 1995) (available at http://www.pff.org/ telecom_revolution.html).