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Public Interest Comment on Broadband Industry Practices

Jerry Brito, Jerry Ellig

June 15, 2007

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Highlights

The Regulation

The Federal Communications Commission issued a Notice of Inquiry seeking public comment on "Broadband Industry Practices."  The purpose is to assess the case for and against different forms of "net neutrality" policies intended to prevent broadband providers from treating different types of traffic differently.  Two key questions the FCC asks are (1) whether the commission has the authority to enforce its Internet Policy Statement as it presently exists, and (2) how, if the commission decided to promulgate new net neutrality rules, it could do so in a manner that would reach only identified market failures or specific problem cases.

Our Findings

• The FCC has no authority to enforce the Internet Policy Statement as it currently exists.
• To make the Policy Statement enforceable, the Commission would first need to initiate a notice-and-comment rulemaking.
• To evaluate whether new net neutrality regulation is necessary, the FCC should employ the same regulatory analysis framework used by other federal regulatory agencies.
• Sound regulatory analysis defines specific outcomes that broadband policies are supposed to produce, assesses evidence of market failure, identifies the uniquely federal role, compares the effectiveness of alternative policies, examines the costs of alternative policies, and compares costs with outcomes.

By the Numbers

• High-speed Internet service ranges from 200 k (kilobits per second) all the way to 30 mb (megabits per second).
• Between 2004 and 2005, many major broadband providers increased download speeds by between 25 percent and 200 percent.  Further increases occurred in 2006.
• Cable modem's share of high-speed lines fell from 60 percent in 2004 to 44 percent at midyear 2006.
• New DSL subscriptions outpaced new cable modem subscriptions in 2005 (5.7 million DSL, 4.2 million cable) and the first half of 2006 (3.1 million DSL, 2 million cable).
• High-speed mobile wireless had a market share of 6.2 percent at year-end 2005 and 17 percent at midyear 2006.

Recommendations

Whether the current proceeding is just and inquiry or prelude to a rulemaking, the FCC could significantly improve the quality of the net neutrality debate by conducting a thorough regulatory analysis that:

• defines specific outcomes that broadband policies are supposed to produce,
• assesses evidence of market failure,
• identifies the uniquely federal role,
• compares the effectiveness of alternative policies,
• examines the costs of alternative policies, and
• compares costs with outcomes.