National Broadband Policy and Spectrum

FCC Broadband

The FCC and National Broadband Policy

The Federal Communications Commission was establish in 1934 as a standalone government agency that was created to regulate the communications capabilities of the United States. As part of the agencies charter, there is the provision that the agency maximize the use of the spectrum that is available through competition and innovation. The role of the FCC has evolved over the years with the introduction of new technologies. Whereas once the FCC was primarily concerned with voice and radio portions of the spectrum, now the agency must regulate a more complex sphere of communication technologies that include both the landline and wireless network bandwidths.

The FCC is truly a powerful organization with their oversight of the public spectrum. The organization has an objective of ensuring that U.S. population has access to communication technologies as well as the latest innovations in the industry. However, the relative state of broadband deployment in the United States has become almost as contentious as various international rankings of broadband adoption show the United States falling behind. According to the latest OECD numbers, we rank 15th among 30 OECD nations in subscribers per-capita, down from 4th in 2000 (Atkins, 2007).

Furthermore, the access to broadband services is not distributed evenly across the population. Persons with high incomes, those who are younger, Asians and Whites, the more highly-educated, married couples, and the employed tend to have higher rates of broadband use at home while conversely, persons with low incomes, seniors, minorities, the less-educated, non-family households, and the nonemployed tend to lag behind other groups in home broadband use (Economics and Statistics Administration, 2010). This leads many to suggest that the FCC should play a greater role in ensuring that the U.S. population has greater access to broadband in a non-discriminatory fashion.

U.S. government passed the Telecommunications Act of 1996 which loosened up regulations on the cable, phone, and long distance companies and allowed them to compete for the same services in the spectrum. It was assumed that this lessen of regulatory forces would liberalize the market and encourage new businesses to compete which would ultimately help keep rates low. However, competition in the telecommunications market did not turn out the way they expected it. Many of the larger telecommunications companies consolidated a gained near monopoly power in the market. This power allowed many companies to only grant access where the investment would provide the greatest returns.

The communication infrastructure was geared towards financial ends as opposed to maximizing access; especially in remote or rural areas. Therefore, many believe that the Telecommunications Act of 1996 is at least partly responsible for the United States relatively low ranking in regards to broadband access when compared to other OECD countries. Generally with the spread of communication technology there is what is considered to be a "network effect." This effect makes the technology more valuable as the number of users and its market penetration increases. However, with the slow adoption of the infrastructure needed to secure such an effect, many of the public's gains through the network effect have not been realized.

Spectrum Analysis

The FCC has been talking about the impending spectrum crisis and has been pushing for more spectrum to be made available. Modern 4G systems have made more applications of mobile web access, IP telephony, gaming services, high-definition mobile television, video conferencing, and 3D television all readily developable applications of the spectrum which will increases its demand. In the National Broadband Plan presented to Congress last year, the agency outlined a plan for freeing up 500 MHz of spectrum over the next decade, with 300 MHz being freed up within five years (Reardon, 2011). The FCC might be in a position in which it must somehow ratio the capabilities of the spectrum so that it is distributed as evenly as possible. The mechanism that has been used is the reverse auction in which companies can bid for portions of the spectrum and it is thought that the public benefits the most from this style of resource allocation.

Privacy and Net Neutrality

Privacy is actually quite difficult to define. Some consider the definition to be more than simply a state of secrecy to be a more comprehensive position of autonomy (Hirshleifer, 1979). There are many sources of privacy concerns that apply to the online sphere. These threats to privacy can emerge from both private and public sources. Foreign Intelligence Surveillance Act (FISA) information privacy, stands at the crossroads of both private and public liberty. FISA creates standards and processes for the government to meet before it can gather personal information as part of certain foreign intelligence activities (Schwartz, 2009).

One of the latest concerns is privacy related to the use of social networking sites and the data collected by private organizations as well as government agencies that might use this data for surveillance. The EFF working with the Samuelson Law Technology and Public Policy Clinic at the University of California Berkeley School of Law (Samuelson Clinic) filed suit on December 1, 2009 against a half-dozen government agencies for refusing to disclose their policies for using social networking sites for investigations data-collection and surveillance (EFF, N.d.). The two main economic considerations for privacy need to consider the market for personal information and the market for privacy. The different factors that are considered in these markets include (Acquisti, 2004):

• Public vs. private

• Selling vs. buying

• Specific vs. generic

• Value for other people vs. damage to oneself

• Lump sum vs. negative annuity

The collection and marketing of private information represents a huge emerging market. Having personal data about consumers can allow marketing operations to directly target specific consumers who might be more inclined to purchase a product or service. Therefore, many advertising organizations are willing to pay large sums of money for private information that is collected regarding online activity. The Department of Commerces stance on privacy is stated by (The Department of Commerce, 2010):

The government can coordinate this process, not necessarily by acting as a regulator, but rather as a convener of the many stakeholders -- industry, civil society, academia -- that share our interest in strengthening commercial data privacy protections…the Department, along with the White House and the Federal Trade Commission (FTC) took a similar approach to commercial data privacy issues as the commercial Internet was emerging in the early 1990s. What emerged within a few years was a hybrid, public-private system to regulate privacy practices. Major web sites agreed to post privacy policies, the then-nascent online advertising industry developed a code of conduct, and the FTC enforced adherence to those voluntary practices.

The issue of network neutrality, or net neutrality, embodies a wide range of different concerns however they can generally be related to avoiding discriminatory practices that could inhibit the public's good by allowing the private sector to control and discriminate the technology for the maximization of profitability. For example, service providers could provide preferential treatment to certain sites if they pay higher fees. This would mean that the internet would no longer be a neutral technology in which smaller firms could compete with major corporations. The corporations would be given preferential treatment in return for paying higher service rates. Smaller competitors would not have the capital to compete and therefore many analyst argue that this could stifle competition.

Furthermore, service providers could discriminate further to the consumer as well. There is already some essence of this currently in place with different network speeds that are in place. There is also discriminatory practices that are based on population density and the availability of broadband. However, the industry could further decimate access for profit by charging higher rates for narrower classes of customers. It has been described as the ability to charge for different "lanes" and would provide unequal access to maximizing product differentiation which would allow the service providers to institute more profitable pricing structures that would offer a greater return on their investment.

Many private firms have argued that this provides a greater incentive for them to develop the access and technology. However, the public's good could also be marginalized because they are to be made profit generators in a monopolistic market structure whereas the spectrum was intended to be a form of public property to further the interests of the public. Furthermore, the issue will be more pressing with the wider availability of "Big Broadband" -- access to the Web at 10 to 100 megabits per second for homes and 1 to 10 gigabits per second for businesses while the small fish are considered to be broadcast, DSL, cable modem, and voice (Hundt, 2003).

There are also many other issues that are present in the regulation of service providers in regarding discrimination. Another issue is discriminatory broadband services in various companies prominently advertises "unlimited" data services only to have these services filter in a variety of ways. However, it and other carriers offer broadband service pursuant both to bandwidth limits, and to contractual limits that bar routine uses of the Internet, including downloading music from legitimate sites like iTunes, use of Voice over IP, and use of sites like YouTube (Wu, 2007). Other advertisements rate broadband speeds as "up to" a certain speed. However, many organizations have found that the speeds advertised in this ploy are virtually never available to the consumer. As a consequence this serves as a form of price discrimination as consumers do not receive what they are paying for.