Uncommon Wisdom

Apr 11 2011   3:49PM GMT

Is the FCC’s wireless data roaming mandate beyond its scope?

Tom Nolle Tom Nolle Profile: Tom Nolle

Continuing on a relatively rare activist track, the FCC has ordered wireless operators to establish reasonable data roaming agreements among themselves, something that is seen as increasing wireless competition and thus potentially reducing retail rates. It’s also ordering utilities to simplify access to utility poles and conduits and to price usage fairly. The problem is that both of these things are considered by some (including Republicans in the FCC) as extending beyond the FCC’s powers.

The key point with this set of arguments isn’t the issues (which we’ll get to) but rather with the fact that they both raise questions on how the FCC can operate and where it needs Congressional action. The Communications Act of 1934, amended by the Telecom Act in 1996, regulates “common carrier” activity most tightly and offers the FCC considerable power there, but much of broadband, cable, and mobile services are outside that common carrier area. 

Given that there’s an increased interdependence among television broadcasting, the Internet, mobile and wireline voice, and broadband services, it’s hard to rationalize the separate “Title” regulations of the Act that differentiate rules and the power of the FCC by service type. What some of the appeals over FCC rules may end up doing is illustrating (by means of a court opinion) that we need a completely fresh communications act. A good one would help, but with Congress unable to get past dogma to even pass a budget, getting a good one seems out of the question.

With respect to the specific orders, there is likely to be some benefit to a more open broadband wireless market. Small players today are unable to leverage spectrum available in rural or even suburban areas because that spectrum doesn’t cover enough geography to be useful to customers and roaming agreements may or may not be available. That said, we can’t come up with any good examples of cases where roaming was denied; the issue is more one of the price, and the FCC’s order doesn’t set prices (it can’t for non-common-carrier services) but simply demands “reasonable” ones. That distinction not only threatens to make the order ineffective, it threatens to make it illegal because demanding any sort of pricing standard may exceed the FCC’s powers under the Act.

The “utility” rule is also problematic in how it might impact the industry. Few companies today would be interested in getting into the broadband market on a wide geographical scale; the cost is high and the ROI is low and falling. Some communities might seek to either establish muni-broadband or to sponsor or encourage in-community services, and where demand and willingness to pay are high enough, local broadband projects might in fact be spawned, encouraged in part by this ruling. The justification for this order, we think, is more clear and thus it’s less subject to overturning, but it does raise the risk of having broadband inequality grow rather than shrink, putting more demands on universal service funds to level the playing field and making the issue more political.

You can see from this why I think there’s at least a possibility that the T-Mobile buy by AT&T might have a regulatory underpinning. Companies like T-Mobile are far more capable of funding appeals to the FCC for “unreasonable” roaming pricing. You can also see that the order adds more fuel to critics of the current FCC—it’s yet another extension of the agency’s powers.  But is it? As Genachowski pointed out, virtually every FCC order is challenged by somebody based on whether the agency had the power to act. The FCC historically wins more than 90% of those appeals. Even the current FCC has kept that average, but we’d have to agree with critics that the one they lost (the Comcast order) has a lot in common with the mobile broadband order and also the neutrality order. The latter is already being tested on appeal.

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