Lazarus Says Net Neutrality May Remain the Norm Regardless of Appeals

Legislation approved this month by Congress letting the FCC hold a voluntary incentive auction of frequencies “obviously holds a lot of promise,” but Lazarus said he’s concerned about limits Congress put on his former employer on repacking and on auction design. Chairman Julius Genachowski and top FCC officials have made similar comments recently (CD Jan 31 p3). Lazarus’ “greatest hope” is the agency will successfully “reclaim a very sizeable amount of spectrum” and so “deliver greater consumer value and innovation over the long run,” he said. “The fear would be that whether due to some of the restrictions on the FCC or for other reasons the auctions are less accessible and therefore a lot less public value is achieved and the wireless networks, which will be choking over time” with data, “don’t see the relief that they need,” he continued.

There’s not “necessarily a magic number” of wireless carriers that would be ideal from a competition standpoint in the country, Lazarus said during Q-and-A with ITIF President Rob Atkinson. Two major national carriers may not be enough, Lazarus indicated. He noted the FCC concerns over AT&T buying T-Mobile, in a deal the companies withdrew, stemmed in large part because of concerns that a “disruptive” force would be acquired. “Too many is inefficient, too few is also bad,” he said of carriers generally. “There is a sweet spot there” and the ideal number “depends on what are the competitors doing,” Lazarus said. “I don’t think there is any significant risk in the United States of having 20 significant competitors.” Broadband competition remains “fragile,” so Lazarus asked whether the move toward a wireless duopoly will continue forward and “who’s going to step up and compete with cable, which has the cheapest way of accelerating speeds.” For the FCC, “if you had less competition and less authority, that could prove” problematic.

There are two ways of looking at broadband competition, said Lazarus, who left the commission several weeks ago. He said an optimist could point to the U.S.’s lead worldwide in 4G, the “promise” behind the spectrum legislation and other factors. A pessimist could say the status quo won’t change, with a “cable monopoly on the wired side” and a wireless duopoly not leading to lower customer bills and more corporate “investment and innovation,” Lazarus said: The FCC has “spent enormous amounts of energy trying to drive toward the first of those two visions,” the optimistic scenario. The spectrum legislation’s limits could “reduce the amount of spectrum that’s recovered and could restrict the ability of the agency to promote competition in the wireless space."

Communications law tells the FCC “not to revenue maximize” and do nothing else because the public interest must be considered, Lazarus said. But he said “everyone understands in the current fiscal environment -- and just look at the debate on the Hill,” that money is crucial. Spectrum legislation was passed by both chambers as a “pay-for” in the extension through the rest of this year of payroll tax cuts that had been due to expire at month’s end (CD Feb 22 p1). The bill was signed into law Wednesday night. “The agency has the ability now to do a rulemaking process” on auctions and will “bring in the world’s foremost experts,” Lazarus said. “Clearly there has to be an eye toward competition. That has been the substitute to regulation since 1996. It has been an effective driver of all the things you want to drive. Whether that is some kind of spectrum screen or those are part of the caps or not, that is why you write a rulemaking.” There’s “no question that everybody needs some spectrum,” he said of carriers.

The FCC is in the third phase under Genachowski, putting into place rules for policies that have been adopted to spur broadband subscriber penetration, service deployment and reduce the gap between spectrum demand and supply, Lazarus said in opening remarks. The first stage was “reorientation and planning,” developing the “gospel” of broadband like the National Broadband Plan, and “reinvigorating the agency itself,” he said. The second phase was “putting into place some foundational building blocks” of rules for the Universal Service Fund, net neutrality and in other areas, he said: In the current “working-out phase,” with rules and policies having changed, “there’s a lot of devil’s-in-the-detail work” to be done. “Not so long ago, there were many in the community who thought maybe Chairman Genachowski wouldn’t get this far,” but he has, Lazarus said.

Better managing of spectrum “is really hard” because of dealing with interference, and “we're going to need to get a lot more oomph with the spectrum we have, and that process isn’t going to take place on its own,” Lazarus said during Q-and-A. The process for dealing with LightSquared’s waiver so it could build out its service was right “given what the agency knew when it knew it,” though there are some “hard questions” that could be raised about why the commission didn’t learn earlier from stakeholders like the Federal Aviation Administration and GPS companies about interference concerns to portable navigation devices, Lazarus said. “The real question is here we have 40 MHz of really valuable spectrum,” which Genachowski was moving to deregulate to allow more use of, Lazarus said. “It would be bad policy over the long run if that failed” and the spectrum wasn’t brought into wider use, he continued: “Now that we know there’s this problem, we need to figure out something to do on the receiver side” for GPS devices. “This is a fixable problem,” he said. “We need to get that spectrum online for other uses."

Internet stakeholders appear likely to follow net neutrality principles, no matter what happens in a case at the U.S. Court of Appeals for the D.C. Circuit, Lazarus said. “The result is more important than the sausage making … and at the end of the day, the norms that exist, I think they will continue to exist.” The FCC held closed-door meetings with about six net neutrality stakeholders before issuing the rules to get rule proponents and opponents to narrow “their bid and ask,” which ended up not being that far apart, Lazarus said. By the time the D.C. Circuit rules, “the basic frame of open networks will be the cultural norm for anybody that’s not an outlier,” he predicted. Oral argument hasn’t been held.

The war of words over the Stop Online Piracy Act may be the norm, Lazarus said. “It’s at least at the moment how democracy works” and “it seems like it’s election season all the time,” which is “unfortunate,” he said. After FCC net neutrality meetings, participants “came out of those conversations taking an extremely different tone than they took going in,” and that can happen on intellectual property issues, Lazarus said. “I would hope that some of the same might occur in and around some of the IP questions that frankly are very, very important,” he said. “I wonder how big the gap is between the bid and the ask” among reasonable people on IP theft, given “most agree that IP theft is a very significant problem” for the U.S.