My Reply to Feld’s “The Last Time The FCC Classified A Service As Title II Was 2007. Here’s How It Worked.”

Harold Feld, who has literally become the face of Title II, posted a 3500-word essay yesterday purporting to show that the “commercially reasonable” standard embraced by the FCC in 2011 to adjudicate wireless-data-roaming disputes has been “an utter, colossal and useless failure.” Strong words.

Of course, the real target of Mr. Feld’s attack is the FCC’s Open Internet NPRM from May, which also embraced the “commercially reasonable” standard to adjudicate discrimination complaints on the Internet; by invoking that standard, the FCC can draw on its authority under section 706—made rock solid by the D.C. Circuit in Verizon—and avoid the nightmare scenario of Title II.

What’s Mr. Feld’s best evidence that the “commercially reasonable” standard was such an “utter, colossal and useless failure”? That T-Mobile filed a petition in favor of adopting bright-line standard to indicate when a roaming offer was presumptively unreasonable. That’s it?

Now it’s true that T-Mobile calls the data roaming “market” in its petition “dysfunctional”—as if there were such a market. Product markets are defined by the voluntary exchange between buyers and sellers. And there is nothing voluntary about granting a horizontal competitor access to your network at cost-based rates—with a regulator’s gun pointed at your head—so that your rival can avoid deploying its own equipment and pick off your retail customers.

Resale markets can function independent of regulation whenever the reseller can perform the retail activities at a cost below the retail cost of the vertically integrated provider. Alternatively, resellers might permit a carrier to engage in price discrimination—a good thing from an efficiency perspective when it expands output—by targeting low-income consumers with special offers that do not upset the standard rates.

T-Mobile’s filing a petition to expedite roaming disputes is hardly evidence of the failure of “commercially reasonable” standard. I’ve commented on the wisdom of T-Mobile’s proposed bright-line test here. T-Mobile and its economist simply picked a bad proxy for consumer welfare. Perhaps some other bright-line test could make sense here. Or perhaps no bright-line test is needed given the symmetry between the parties (two established carriers) to the roaming dispute. That an access seeker wants to get access sooner and at a lower rate is evidence of absolutely nothing. To wit: If data roaming were governed by Title II instead, T-Mobile would still be seeking access sooner and at a lower rate—this is how rent seeking works. Indeed, if Mr. Feld had his way, rent seeking would skyrocket under a Title II regime.

By comparison, Mr. Feld points to the unmitigated success of Title II in governing wireless voice roaming. Seriously? Voice is just one of thousands of apps that ride over a data connection. It is not a standalone service, but sold as part of bundle alongside a data plan. Whereas standalone voice service had meaning a decade ago, it is a hypothetical construct today. Unlike reclassifying broadband Internet, reclassifying wireless voice service was not a massive reclassification after years of settled expectations. And unlike broadband data service, voice is not a service requiring massive additional investment to make it better. Who cares how an imaginary service is regulated?

To prove that the FCC has the fortitude to forbear from investment-destroying Title II regulations, Mr. Feld claims that, when reclassifying wireless voice roaming, the “FCC declined to adopt any price regulations, price caps or tariffing.” Never mind the fact that an access obligation (or any duty to deal for that matter) implicitly entails price regulation—else the obligation has no meaning. Although he uses imprecise language, Mr. Feld is willing to waive retail price regulation when he smothers an industry with red tape, but he is not willing to waive wholesale price regulation (for reasons explained below).

Finally, let’s accept Mr. Feld’s claim that the “commercially reasonable” standard has been a disaster for wireless data roaming. So what. Such a finding would have meaning only if the difficulty in adjudicating interconnection disputes among wireless ISPs were a good proxy for the difficulty in adjudicating discrimination complaints on the Internet. Wireless roaming is harder because it is forcing an unnatural act (like dogs and cats living together); getting an ISP to extend a priority offer to an independent website, or stopping an ISP from degrading a website’s connection speed is far easier by comparison. And to expedite the resolution of such complaints, the FCC can offer some bright-line triggers in the new order itself (rather than waiting for a petition from an interested party). When the trigger is satisfied, the burden of proof would shift back to the ISP. Easy peasey, in Feldian speak. Compared to wireless data roaming, establishing bright-line triggers for resolving discrimination complaints on the Internet make more sense here due to the potential asymmetry between an ISP and an upstart app provider.

By defending Title II so strenuously, Mr. Feld and his band of rabble rousers seem more intent on getting broadband reclassified for the sake of doing it, than in coming up with legally sustainable rules to prevent blocking and harmful paid priority. In his mind, net neutrality has always been a crude, “second-best option” to open access. According to a Public Knowledge filing in 2010, reclassification “would expand the range of opportunities for more aggressive regulatory steps geared to promote widespread deployment and adoption of advanced telecommunications services.”

Let’s resolve the net neutrality debate once and for all. The ISPs have agreed to submit to section 706 regulation without a challenge. It’s time for Mr. Feld to put down his arms and make peace.

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