FCC's "Third Way" Lacks Credibility with Financial Markets

In a new study , the Phoenix Center examines the financial effects of the FCC's proposed "Third Way" for broadband regulation.

According to FCC Chairman Julius Genachowski, this "Third Way" would essentially entail having the Commission reclassify broadband transport as a "telecommunications service" under Title II of the Communications Act, coupled however with aggressive use of the FCC's forbearance authority under Section 10 of the Communications Act to eliminate many of the more burdensome requirements of Title II regulation.

To explore this important topic, the Phoenix Center first analyzes the reclassification issue in terms of a "broadband credibility gap." The Phoenix Center provides a simple game theoretic analysis that exposes the underlying issue surrounding regulatory classification. The Phoenix Center demonstrates that a "light touch" toward regulating broadband is not credible, since the present Commission cannot bind future actions of the agency. Moreover, the Center cites the current Commission's own actions to demonstrate that it lacks the necessary self-discipline or mindset for light touch regulation.