Big Tent Regulation

In my earlier post comparing and contrasting telecommunication and information services I promised a third one on where I see regulation evolving in the future. That is the subject of this post. To begin, I will take a brief foray into the past so that we can understand how we've come to the present regulatory dilemma, of which network neutrality is but one aspect. While my focus is on the US, the discussion is applicable to Canada and other countries.

Going back a century or so, it was at first necessary to regulate radio spectrum since interference among services could only be accomplished with the heavy hand of the government. Without regulation, commercial, private and government (including military) services would simply select the best frequency (wavelength) to meet their own needs, without regard to other users of the radio spectrum. The problems should be obvious. This brought the FCC into existence -- back then it was know as the FRC, emphasizing its initial focus on radio. Over time the radio spectrum was segregated by service, licenses were issued and technical standards established, and performance was both monitored and enforced. Everyone benefited from this state of affairs, including the public. International treaties were negotiated to deal with the habit of electromagnetic radiation to ignore borders.

Telephone service was by then old hat, having been offered to the public for several decades. Since these signals ran over wires, there was no need for the type of regulation in place for radio. There were, however, other challenges. One was interference, since radio transmissions could be induced on telephone wires. This was not too much a matter of regulation at first since the telephone companies were able, and felt obliged, to take measures to protect their equipment. There was no third-party equipment market selling to consumers since in those early days the entire network, including the telephone sets, belonged to the telco. Therefore, the telco could handle the issue themselves -- there was no such concept as FCC type approvals (regulations parts 15 and 68).

A bigger problem, one with serious political ramifications, was the insatiable appetite of AT&T; for many years they had been buying up smaller telcos (a century ago it was much like a dot-com boom) and were close to creating a monopoly for themselves. In danger of being nationalized by the government, they halted their acquisitiveness, stopping at about 80% of the total market. The existence of several thousand small telcos across the country made it politically unpalatable for the government to nationalize the industry. Interestingly, this 80% figure remained stable for half a century, until implementation of the AT&T Consent Decree in 1984.

After WW-II, television took off, and came under radio regulation for spectrum allocation, technical standards and licensing of transmitters. Networks which had come into existence in the radio era extended into TV and came to dominate programming. Apart from decency, ties to advertisers and other basic rules, content was unregulated.

Then cable came along, improving reception quality and quantity of stations using direct feeds, amplifiers and scramblers (this last was for premium content). Being a new type of distribution model, and even a source of new local content, it also came under regulatory oversight. This became particularly important as cable companies began to offer premium and unique content, required access to rights-of-way, competed with others and rebroadcast and substituted content, including advertising.

At every stage, regulation became more expansive and complex, often falling under several regulatory regimes: federal, state and municipal. As is typical with governments, they tend to add more laws rather than simplifying or removing them. Even so, as technology evolved the regulations failed, as they often do, to keep up with what companies and their customers were able to do. The Communications Act covered in whole or in part: wired telecommunications and information services, wireless broadcasting, cable distribution and broadcasting, wireless personal communications, including paging, cellular and point-to-point, private radio and dispatching, satellite transponders and direct broadcast, and a whole raft of military and commercial services.

One unwritten assumption upon which much of this regulation rested was that there was a strong correspondence between technology and service. Copper loops were good for telephony and low-speed data; coax was for TV and radio distribution; microwave was for point-to-point communication; wireless was divided into bands, within each was one service utilizing one style of modulation (coding) to maximize coordination, sharing and standardization of products. When it first appeared, fibre complemented point-to-point communications technologies and so did not require special attention.

Then everything changed. Copper carried high-speed data and even TV signals; cable carried high-speed two-way data and telephony; wireless carried voice, data, TV and information services; satellite circuits paired with copper to provide asymmetric high-speed data; and every data service supported IP and internet access, and which in turn supported a bit of all the above. Quite suddenly the Communications Act and all forms of regulations became a ball and chain impeding technological progress while also unable to grapple with the accelerating speed of the marketplace. A decade of tweaking the rules has only made the problem worse. Something has to give.

This brings us back to where we began, with the FCC proposing to introduce new rules to treat broadband as telecommunications rather than an information service. This, I believe, is a sensible step -- at least in concept -- to set things aright once more. In this battle, network neutrality will become a minor skirmish in the larger war, which will be to completely remake communications regulation. The reason hearkens back to an old and greatly reviled buzzword in the industry, one that has been grossly abused in technology-sector marketing for two decades. This buzzword is convergence.

However, unlike in the past, this time convergence actually has some weight since there really is convergence occurring in the marketplace and not just in marketing slogans. Once the move to bidirectional broadband data became standard for copper, coax, fibre and wireless, especially personal mobile wireless, IP became the common services protocol. Since IP, whether private or in the public internet, quite naturally accommodates voice, video, real-time and store and forward services, the old assumption of technology determining service became obsolete. It also separated transmission from service so that service providers lost control of services and content as entrepreneurs and users themselves developed software and services that exploited IP networks. Not only did regulators fall well behind the state of the art, they also found themselves having to regulate not just a modest number of commercial entities but every citizen and enterprise, including those outside the country's borders.

Regulators and legislators were (and are) overwhelmed. They have had some success in using their power over commercial entities to leverage control over what the universe of individuals can do, but this is imperfect and, often, politically sensitive. This goes well beyond my topic today, but suffice it to say that the regulations will have to be simplified to deal with this convergence. We can call this Big Tent regulation since we want to take the now mostly superfluous technology distinctions out of the regulations to focus on the critical issues of services and content. With technology and the marketplace now experiencing convergence, so too must the laws and regulations. There will still need to be technology regulations -- in particular, wireless spectrum usage and equipment type approval -- but those must be treated separately from services and content. Individuals and enterprises providing services and content can now be effectively regulated without regard to the base technology.

This is what I'll be looking for as the FCC process unfolds in the coming months, and possibly years. With all the political sensitivities involved, we can be sure that legislators will get involved to influence the FCC, even going as far as introducing new legislation. It'll be messy, to be sure, but necessary. If they do it well there is a chance it will become a model for other countries. There is precedent for that, as has been seen for spectrum auctions, service provider safe harbours, and competition rules to reduce monopolistic practices.

When I say "do it well" with regard to communications regulation, I mean that the regulator should take the minimum steps to ensure that technology and business model innovation should not be constrained, and that there is a level competitive playing field, creating opportunities for service providers and real choices for consumers. True convergence enhances these possibilities more than has previously been possible. Realizing these benefits will require some wisdom on the part of the regulators and their political master. No matter the outcome, it will be very interesting to watch the process unfold.