Monday, May 17, 2010

"Is common carrier a useful construction?" (For telco regulation nerds)

The US Federal Communications Commission has an interesting history. It came into being in the 1930s and picked up interstate aspects of telecommunications that had previously been regulated by a more generic interstate commerce regulator. The deregulatory thrust of the 1996 Telco Act created a distinction between telecommunications and information services, with the former included in the FCC remit and the latter not.

The FCC Chairman has recently announced a change in its approach to broadband which had been classified as an information service and hence not subject to the full regulatory powers of the FCC. The announcement is that the transmission component of the access service as a telecommunications service. I find this interesting because I thought the distinction between the two was legislative in definition not just in application, though I suspect the narrow conception will meet legal challenge.

The decision was covered in an excellent article in this week's The Economist. It points out that some of the underpinning theory of telco regulation in the US was based on the concept of "common carrier" which has a long history dating back to road freight by carts. We forget sometimes that the European market and formr British colonies have little history of regulating private sector telcos as the model was primarily about service delivery through legislatively mandated monopoly 'PTTs' (Post Telegraph and Telecommunications authority).

Th article also provides a reference to this article by James Speta. In this article Speta neatly summarises in one sentence the justification for "common carrier" rules;

Common carrier duties have been imposed based variously
upon theories of de facto and de jure monopoly, on the theory that the
enterprise had become “essential,” and upon theories that the enterprise
was publicly concerned in a particular manner.

The monopoly or market power argument is well known and is the only real basis in Australia's telco regime for economic regulation. It can be argued that the three limbs of the Long-Term Interest of End Users test (promote competition, efficient investment and any-to-any conectivity) can be derived from each other, and that promoting competition, where efficient (i.e. beyond the natural monopoly element) is the policy objective.

The concept of the service being "essential" in the common carrier case is not essential facilities doctrine as we are familiar with it in anti-trust - it is not about star-posts being essential for fencing, or PSTN access and egress being essential for long distance telephony. It is that communications services are essential to all other trade and commerce and social engagement. As a consequence it is right and proper that Government regulate to make sure the services are available to all.

The final element is that the enterprise usually obtaind public concessions. In the telco case it is the Low Impact Facilities exemption from planning, and the ability to use public land to string wires and glass. In the road transport case it is publicly maintained roads.

There would appear to be good reasons to embrace common carrier doctrine for communications services generally. Perhaps a greater focus on the wider context than just monopoly might have helped develop a market structure within which a return to Government ownership of key elements (the NBN) was uneccessary.

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