FCC Broadband Agenda Overly Ambitious, Darby Warns

The FCC has put an unrealistic amount of work on its agenda to complete in too short of a time frame following release of the National Broadband Plan, said Larry Darby, former Common Carrier Bureau chief and FCC chief economist, during a New York Law School panel discussion late Monday. Some of the issues the FCC plans to tackle will likely elude easy resolution and Congress may have to step in, Darby warned.

FCC Chairman Julius Genachowski has released a list of some 60 follow up orders, rulemaking notices and notices of inquiries as follow ups to the plan, Darby noted. “For an agency that has trouble completing three or four major proceedings a year, that meets only once a month, that’s a very, very tall order,” he said. The ambitious agenda comes from an agency that in 1998 said of Intercarrier compensation overhaul “this is one of the most important things we have to do and we're going to do it next month,” Darby said, noting that that issue is now part of the broadband plan.

"Much of … the first part of the plan is a renewal of the issues we've been debating for a long time,” Darby said. “What do you mean by universal service? What do you mean by affordable? What do you mean by net neutrality?” None offer easy answers, he said. “Eventually these issues are going to be resolved in the Congress and/or they're going to be resolved in the courts."

The National Broadband Plan also doesn’t do a good job of explaining the costs of more widespread broadband deployment, Darby said. “There’s no such thing as free regulatory reform. There’s no such thing as a free broadband plan,” Darby contended. “This is going to cost a lot of money. My concern is not for the money it costs but the expectation [the plan] creates that we're going to be able to do it on the cheap."

The cost of serving the 9 million households where broadband isn’t available will be significant, said Raul Katz, director of strategy at the Columbia Institute for Tele-Information, who also spoke. The plan’s goal of 100 Mbps to 100 million households will require major investments, especially for some network operators depending on the architecture of their current networks, he said. “I'm trying to calculate the price tag right now,” Katz said. “But I did this for Germany and with their national broadband plan that says they're to push 50 Mbps to 80 percent of the population, the price tag was 35 billion Euros.” That was for a country where people live closer together than they do in the U.S., he said.

Analyst Anna Maria Kovacs said the broadband plan makes several assumptions that don’t necessarily recognize economic realities. The plan makes “a really big bet” on an assumption that competition at the wholesale level and unbundling will lead to broadband deployment, Kovacs said. “I'm not sure the investment community looks at it quite that way,” she said. “Investors tend to be a lot less happy with competition than policymakers tend to be. So I think it’s worth pointing out that this is really one of the major bets.”

The plan also doesn’t fully account for the challenges the Internet poses for both content and service providers, Kovacs said. “One of the things that might go wrong is an issue that’s not really addressed a great deal in the plan, which is the fact that broadband and the Internet are these enormous forces for disintermediation,” she said. “People have talked a little bit about where is the business plan here and the business plan essentially appears to be disintegrating segments as broadband is deployed and as the Internet takes over.” For example, she said, carriers build out broadband networks only to find that Skype, available for free, displaces traditional phone service. “It’s a wonderful thing for the consumer but it’s not necessarily a great business plan for the network provider."

Darby also questioned whether the FCC will be able to make quick decisions called for by the plan in an “environment where we measure technology and technological change by the Internet,” especially given the legal requirements of the Administrative Procedure Act. “I can tell you how long it took us to open markets to MCI many, many years ago -- at one point there was an eighth notice of proposed rulemaking and tentative decision on how to treat MCI, whether or not MCI was a common carrier,” Darby said. “The notion that we may be ready to replicate that experience when so much depends on innovation and the rapid development of this sector I have to tell you gives me some nightmares.”