[Commentary] Count yourself unlucky if you are a US telecommunications customer, because you have been funding a system that is far behind international standards.
It is time for the US to catch up with the rest of the world class for subsidizing broadband, especially if taxpayer money is on the line. International best practice carefully identifies areas where service is not commercially viable, requires service providers to compete for subsidies, and holds subsidy recipients accountable for results. Best practice begins with identifying smart subsidy and true access gap zones. The smart subsidy zone is those rural or high cost areas and low-income population groups for whom service is not commercially viable absent a one-time subsidy for initial investment. The true access gap consists of similar areas but with the added requirement that service isn’t commercially viable without an ongoing subsidy for operating expenses and maintenance. Competition for subsidies ensures that money isn’t wasted. Competition within a market tends to give the best results for customers, but this competition isn’t feasible in smart subsidy and true access gap zones. So the next best solution is competition for the market.
[Jamison is the director and Gunter Professor of the Public Utility Research Center at the University of Florida. He served on the FCC Transition Team for the Trump Administration]
[Commentary] What would happen if the US Department of Energy decided to help low-income households afford solar power by giving money to companies which report that they lease solar panels to these households? In all likelihood, fraud would be a difficult and costly problem, and solar companies would benefit more than the households. Despite the obvious flaws of a system where companies receive money based upon their service claims, this is essentially how the Federal Communications Commission’s Lifeline program works: Telecommunications companies receive money based upon how many households they claim as Lifeline customers. There is a better way — a direct subsidy would be more beneficial to low-income households. If the Lifeline program were ended at the federal level, states would likely need to change their systems as well. That would be complicated, but it is time to get telephone companies and telephone regulators out of the business of public assistance, leaving it to government agencies that are designed to be experts in that field.
[Jamison the director and Gunter Professor of the Public Utility Research Center at the University of Florida. He is also part of the Trump Administration’s FCC Transition team]
[Commentary] There seems to be a growing consensus that the Federal Communications Commission’s structure is outdated and hinders its work. What should be done? Implement a structure that moves away from antiquated silos — wireline, wireless, and media — to one that reflects the dynamic digital ecosystem and that empowers sound analytical work. The existing structure limits how people think, encourages regulations that limit innovation, and facilitates industry capture.
To return the US to a position of world leadership, guiding principles for our policies should include: 1) Any person should have the right to purchase communications services from anyone else at any time (i.e., no entry restrictions for network, functions, applications, and content); 2) Anyone should be allowed to provide any communications service using any legally placed and acquired technologies (i.e., no technology restrictions); and 3) No government activity or regulation should provide a uneconomic favored position to any provider (i.e., no distortion of customer-led markets).
A new structure would include a bureau of economics that analyzes markets and conducts regulatory impact assessments, a bureau of engineering that assesses technologies and is responsible for radio spectrum and equipment licensing, a competition bureau that enforces rules that protect liberal markets, and a consumer protection bureau. The first two bureaus are all about analysis, and the latter two are all about enforcement, with the engineering bureau playing a significant enforcement role with respect to radio spectrum and equipment. Effective leadership will be needed to address the adaptive challenges of letting go of long-held traditions and embracing new values of rigorous analysis, political and industry independence, transparency, etc. Congress will need to act to focus the agency on ex ante regulation only in the presence of monopoly and on managing scarce resources (such as radio spectrum and funds for universal service) consistent with dynamic and competitive markets.
[Jamison is the director and Gunter Professor of the Public Utility Research Center at the University of Florida – and a member of President Trump’s FCC Transition team]
[Commentary] The short answer is, “No!” In an independent regulatory agency like the Federal Communications Commission, political alliances should be left at the door. That has not been the case the past few years and now is the time for change.
Politics isn’t the only thing to blame for the wide swings in FCC regulatory decision-making. The agency has also lost its way. Originally designed to regulate monopoly telephone companies, oversee broadcasters who had exclusive rights, and manage scarce radio spectrum, the FCC’s authorizing statues are badly outdated, despite having been updated in the Telecommunications Act of 1996. Now that competition is the norm, industry players seek to use the agency’s authority for ex ante regulations to hinder rivals, to the detriment of customers. A statutory change should direct the agency to focus on managing radio spectrum and, if needed, subsidies for broadband in rural, high cost areas where affordability is an issue. It should restrict the agency from engaging in ex ante regulation except in the case of actual monopoly, and when a rigorous cost-benefit analysis, followed up with evaluations, demonstrates that ex ante regulation improves outcomes for customers. Absent a statutory change, the commission itself can use its authority to forebear from regulation wherever there is competition and means test its subsidies.
[Mark Jamison is part of the FCC transition team for President Trump. He is the Gunter Professor of the Public Utility Research Center at the University of Florida]
[Commentary] In a nutshell, the traditional approach to assessing market power is to first define “market” and then define “power.” But what if markets are rapidly changing so that defining one is illusive? And what if what appears to be power is fleeting or is actually earned by a company simply doing a great job for customers?
It’s time to look for a new approach. Market boundaries and market outcomes result from basic conditions and people’s decisions. In tech, by the time we observe the boundaries and outcomes, they are no longer relevant, and we should therefore rely instead on analyses of the basic conditions and decisions.
[Mark Jamison is the director and Gunter Professor of the Public Utility Research Center at the University of Florida and was selected by President-elect Donald Trump to lead his FCC transition team.]
[Commentary] Outgoing Federal Communications Commission Chairman Tom Wheeler has often been criticized for his lack of effective leadership. Politicization, the decline of analytical work, and lack of transparency have plagued the agency. Perhaps the most challenging job for the new chairman will be rebuilding the agency’s credibility, pushing back the political opportunists, and mending the commission’s internal divisions. Fortunately, previous chairmen have provided some lessons on how to do this:
- Stop the wolves at the door
- Engage the larger mission
- Build a strong staff
- Manage political capital
[Mark Jamison is the director and Gunter Professor of the Public Utility Research Center at the University of Florida]
[Commentary] Do more subsidies actually finish a job and provide a net benefit? Apparently not. Customers’ spending habits are telling us they have other priorities. Furthermore, people advocating more subsidies for broadband tend to ignore how inefficient the subsidy programs are and exaggerate the benefits of subsidized broadband.
Clinton proposes to grow subsidies currently provided under the Department of Commerce’s Broadband Technology Opportunities Program (BTOP) and the Federal Communications Commission’s E-rate program, to grow the FCC’s Lifeline program, continue the Rural Utilities Service program for broadband, and to provide broadband grants to governments. Economist Hal Singer (not Clinton) suggests an income-based subsidy of $4.3 billion annually to induce 20 million customers currently unwilling to pay the full price for broadband to buy it. What happens if these proposals are put in place? If past experience is a guide, Clinton’s ideas will mean more failed and uncompleted projects, political favoritism, and little if any positive impact. The flaw in her plan and Singer’s plan for Lifeline-like subsidies is illustrated by the FCC’s current Lifeline program.
[Jamison is the director and Gunter Professor of the Public Utility Research Center at the University of Florida and serves as its director of telecommunications studies.]
[Commentary] The Federal Communications Commission under Chairman Tom Wheeler has come under increasing fire for suppressing economic analysis and being politically driven. In effect, we have not had an FCC for the past three years, at least not in the way the agency was intended to operate. So that raises the question: Do we really need the FCC? The answer is “no, but yes.”
There seem to be three reasons why we still have the FCC. One is inertia: Dissolving a federal agency is a large task and Congress often has higher priorities. Second, the FCC is valuable to businesses and interest groups that are benefitting from its activities: The recent work on network neutrality, business data services, and set-top boxes are bestowing benefits to some segments of the industry at the expense of other segments, and at the expense of customers, who ultimately bear the brunt of regulatory rent seeking. The FCC’s universal service subsidies have, for example, delivered profits to numerous telephone companies over the years. And the cottage industries formed in support of net neutrality, set-top box regulation, and universal service policies employ a large number of people. The third reason we still have an FCC appears to be that it is important to keep radio spectrum allocation independent of day-to-day political pressures.
[Jamison is director and Gunter Professor of the Public Utility Research Center at the University of Florida and serves as its director of telecommunications studies.]
[Commentary] Now that Brexit is underway, maybe we can ask the Brits to help us with some of our own independence problems. In particular, could we get some guidance on how to make the Federal Communications Commission more independent and substantive? Can we reform the FCC without losing its world-class talents? Yes. The problem appears to be largely governance.
Taking lessons from the Brits (and others), a new governance model would have a small executive team that is responsible for carrying out the work of the agency, subject to a board made up of economists, accountants, engineers, social scientists, and business persons whose professional loyalties are to their professions, not politics. As with today’s commission, the board would be held accountable by courts, administrative procedures, and congressional oversight, and members would serve staggered terms and could not be removed without cause. A key difference would be selection: Appointments would be made by a joint committee consisting of equal numbers of Republican and Democratic members of Congress, board members, and representatives of academia and business. It appears that regulation by president-appointed commissions is an idea whose time has passed in the US. If we make effective reforms, maybe the US can once again become a world leader in effective regulation.
[Mark Jamison is the director and Gunter Professor of the Public Utility Research Center at the University of Florida and serves as its director of telecommunications studies.]
[Commentary] RIP, America’s robust video market. Federal Communications Commission Chairman Tom Wheeler has a plan for you and he doesn’t intend to let you refuse it. The week of Sept 5 the FCC released a fact sheet on Chairman Wheeler’s new plan to rid the world’s most vibrant video marketplace of set-top boxes, those devices that almost all cable TV customers choose to lease each month. His plan? Force creation of an app and a standard app license that would take over the video marketplace. What could be more innovative than government-directed software and business contracts?
Apps may be the future of video entertainment, but that does not mean that government should be making this choice. Often, economic regulation pits regulators against customers in determining industry direction. Only one will win: Either the customers will determine the future by deciding which products and services are worth buying, or the regulator will drive the future by coercing the industry into ignoring market signals. Given the unprecedented value customers have enjoyed from US tech and video markets, let’s hope the Wheeler-app doesn’t happen.
[Mark Jamison is the director and Gunter Professor of the Public Utility Research Center at the University of Florida]