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"Let the FTC Do It!" Maybe It Already Can.

Progress Snapshot
Release 2.12 April 2006

by Raymond Gifford *

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Last week, FTC Chairman Deborah Majoras responded to a House Judiciary Committee request about the FTC’s jurisdiction over broadband Internet access. The straightforward legal conclusion of her letter: “the Commission believes that broadband Internet access services are non-common carrier services and are clearly within the FTC’s jurisdiction.”

As legal analysis, the FTC’s view seems unimpeachable. The Supreme Court’s decision in Brand X and the FCC’s Wireline Broadband Internet Access Order respectively determined broadband Internet is not a “common carrier” service. Thus, the exclusion of common carriers from FTC jurisdiction is not applicable, and the FTC has jurisdiction within its consumer protection and competition policy mandates.

As policy, this “new” FTC authority can only be regarded as salutary. As an agency that bounds itself by strict competition policy and consumer protection legal norms, the FTC’s authority makes the legal landscape more certain and the competition rules less capricious for broadband. The FTC’s assertion of authority assures broadband investors of their property rights, and limits regulatory redress to those genuinely abused by misuse of monopoly power. To be sure, there are superior and more coherent proposals like the DeMint Bill, S. 2113, which imports the FTC’s normative standards across all communications and unifies jurisdiction within a single agency.

But in the short-term, the FTC letter has more to do with wrangling between Congressional committees than any concern about the regulatory landscape for broadband. As with many things in Washington, Judiciary Committee Chairman Sensenbrenner’s request for the FTC’s opinion is neither so innocent, nor straightforward as it seems. It has everything to do with whether the House Commerce Committee and its Chairman Joe Barton get exclusive shot at writing and passing communications legislation, or whether the Judiciary Committee also gets a crack. If there is daylight for antitrust law to insinuate itself into the communications arena, then the Judiciary Committee can claim the right to be referred communications legislation. If not and only the FTC’s “consumer protection” authority is implicated, then it all falls in Commerce’s bailiwick.

For those favoring rapid entry of competitors into the video market, the last thing they want is a referral of the Barton/Rush franchise reform bill to the House Judiciary Committee. Not only would such a referral stall franchise relief legislation designed to encourage Bell entry into video markets, but it would also allow Sensenbrenner to resolve his peculiar but concerted disagreement with the Supreme Court’s Trinko decision, where the Court in large part insulated the communications arena from antitrust scrutiny.

Despite the esoteric purpose of the letter being to trigger a referral to the Judiciary Committee, properly understood, the substance of the letter is truly beneficial to broadband Internet providers, and consumers. By leaving the hyper-political and legislative-driven agenda(s) of the FCC and instead residing in the FTC, broadband is insulated from the legal laxity of the FCC and delivered to the more general, rigorous and focused activity of the FTC.

To begin with, the FTC is an agency dedicated to competition policy and consumer welfare, as opposed to the much less grounded ‘public interest’ mandate of the FCC. Claims for regulatory intervention into broadband at the FTC will have to be grounded in claims of harm to consumer welfare caused by abuse of market power or consumer fraud. These standards, though broad, have definite meaning to attorneys and regulators schooled in the economics of competition policy. This means the law applied by the FTC is both definite in meaning and hesitant to interfere in markets absent clear harm to consumer welfare.

In addition, as an agency of general jurisdiction, the FTC is less prone to interest group capture and the intense rentseeking that besets the FCC. The FTC’s mandate extends across the economy. Accordingly, narrow interest groups – be they self-professed ‘consumer’ groups or industry – will find it much more difficult to ‘capture’ the FTC’s regulatory agenda. Similarly, the agency’s broad economy-wide mandate makes it more difficult, but certainly not impossible, for Congress to militate for a given regulatory action.

Finally, the FTC is largely an enforcement agency that focuses on investigation and redressing of specifically alleged and proven harms to consumer welfare. Because the FTC largely confines itself to after-the-fact enforcement of consumer protection and competition law, it tends to focus on specifically proven facts and evidence of harm, as opposed to general surmise. After-the-fact regulation also has the strength of cabining regulatory errors to a given set of facts. By contrast, the before-the-fact rulemaking regulation of the FCC can err across entire industry sectors.

None of this is to say that the FTC is without its deficiencies and excesses. The FTC’s conditions on the AOL-Time Warner look preposterous in hindsight (but then, so do the FCC’s conditions). The FTC has a broad statutory mandate that a strong-willed regulators can pervert to their private ends. Unless Congress is willing to revisit the dubious assumptions that underlie the progressive-era hubris about the role of ‘experts’ in economic planning – a highly unlikely prospect – then we are stuck with these respective regulatory agencies. It does not then need to be proven that the FTC never regulates counterproductively. It certainly does. For present purposes, the FTC needs to merely outperform the FCC in terms of regulatory behavior, or, as the case may be, restraint. On this count, the FTC is surely to be preferred.

Intramural squabbles within Congress should not obscure that FTC supervision of broadband Internet access will be a positive for broadband consumers and providers. A rule-of-law regulator focusing on competition policy provides a much more stable and rigorous normative legal grounding for broadband policy. Indeed, as the Commerce Committee addresses its own communications bill markup this week, it would be well-served to heed the competition policy limits inherent in the FTC Act. A bill that brings within its ambit the competition policy grounding of the FTC, while avoiding the distraction of a Judiciary Committee referral, might be the best that can be done in a policy climate where belief in property rights and markets is rare.

* Raymond Gifford is President and senior fellow The Progress & Freedom Foundation. The views expressed here are his own and are not necessarily the views of PFF, its board, fellows or staff.

















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