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CONTACT: Patrick Ross or Amy Smorodin
October 20 , 2005
(202) 289-8928
DACA Revises Federal-State Framework
Release 2.0 Clarifies State Jurisdiction, Addresses Local Regulation

WASHINGTON D.C. - Responding to a wide array of input following the release of a draft proposal on a framework for federal and state regulation of communications, members of the Digital Age Communications Act (DACA) Federal-State Framework Working Group have released a second draft for review and comment. This latest iteration clarifies the role of states in rate regulation, provides two avenues for competition policy, and sets limits on the role of states in regulating social obligations. It also includes details on the appropriate role of local officials, specifically involving rights-of-way, franchising issues, municipal entry into telecom, and the imposition of taxes. DACA is an ongoing project in which The Progress & Freedom Foundation is working with other think tanks, members of academia and former officials from the last five Presidential administrations to craft a new communications regulation model for the digital age.

"The DACA project provides for a rare opportunity to take a first principles approach to telecommunications regulation," says University of Colorado at Boulder Law Professor Phil Weiser, executive director of the Silicon Flatirons Telecommunications Program and co-chairman of the Working Group. "All too often, issues of jurisdictional authority are used as opportunistic arguments to serve the particular interests of an industry player. Together, our group sought to elevate the debate by developing intellectually rigorous answers and provocative solutions to difficult questions."

"Thoughtful communications reform requires that we strike a balance between safeguarding core government interests -- such as protecting consumers and managing rights-of-way -- and ensuring that government does not thwart competition inadvertently," says Progress & Freedom Foundation Senior Fellow Kyle Dixon, co-chairman of the Working Group. "The revised proposal contributes more fodder to a debate that remains critical to bringing consumers better choices in telephone, video and broadband services."

Shortly after the July distribution of Release 1.0, Weiser and Dixon presented it to the National Association of Regulatory Utilities Commissioners. That was one of numerous sources of feedback the Working Group received. That feedback, and further deliberation by the working group, yielded these revisions:

•  Addressing perceived ambiguities in state authority over rate regulation in Release 1.0, the working group clarified that states would retain the authority to keep a basic local residential service rate, but all other state rate regulation would be preempted. Even this regulation would fade away unless the FCC found evidence of "unfair competition" pursuant to DACA's Regulatory Framework proposal.

•  The Working Group offered a choice of two models for competition policy adjudication. Some members supported having all such adjudication occur at the FCC, with the states precluded. Others suggested that the FCC should be able to delegate "unfair competition" adjudication to states when the allegation occurs entirely within one state.

•  While states would not be completely precluded from imposing social obligations, there would be three avenues states could pursue based on their expertise: 1) Rights-of-way (ROW) management with franchises eliminated and fees based solely on costs. 2) Consumer protection limited to the "unfair or deceptive practices" based on the Federal Trade Commission model proposed by another DACA Working Group. 3) Promotion of public safety and homeland security, subject to federal law in those areas.

Release 2.0 explores the role of local regulators in some depth, an examination that was not included in the first draft. Noting that the "role of localities in telecommunications regulation is an area of longstanding controversy, particularly insofar as new technologies have not fit the mold of their established counterparts," the Working Group examined four areas where local authorities have influenced communications policy:

•  With respect to ROW management, the Working Group proposes limiting fee payments to costs caused by the effort to access ROW, with preemption when authorities materially inhibit entry.

•  The Working Group expressed skepticism regarding the need for classic video franchises in a digital age. It embraced a revised framework that, at a state's option, would provide for statewide certifications that would entail no rate regulation or build-out requirements. Existing franchise agreements would be phased out over 3-5 years.

•  On municipal entry into communications, the Working Group did not believe a federal ban on such entry was appropriate, but left to the states whether or not to restrict municipal entry. Suggesting "it is quite plausible that reasonable cases of municipal entry into local telecommunications markets may exist," such as sparsely populated communities underserved by commercial providers, the Working Group concluded that "anticompetitive behavior is a promising strategy for municipally-backed market entrants and therefore would subject them to the same 'unfair competition' standard as other market players."

•  Telecom taxes are on the rise and deter consumer adoption and communications service provider buildouts, so the Working Group called for the preemption of all industry specific taxation on electronic communications services.

Release 2.0 will be discussed at an event Wednesday, October 26th, sponsored by PFF and Silicon Flatirons. "Re-Examining the Role of State and Local Governments in Telecom Regulations" is 3:30-8 p.m. MST in the Fleming Law Building on the Boulder campus of the University of Colorado . Participants include Weiser, Dixon , and the DACA Co-Chairs, PFF President Ray Gifford and Senior Fellow and Director of Communications Policy Studies Randolph May.

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



The Progress & Freedom Foundation