Home North AmericaNorth America 2007 Functional federalism – a pragmatic approach for policymakers

Functional federalism – a pragmatic approach for policymakers

by david.nunes
Jim KerrIssue:North America 2007
Article no.:2
Topic:Functional federalism – a pragmatic approach for policymakers
Author:Jim Kerr
Title:President NARUC and North Carolina Utilities Commissioner
PDF size:192KB

About author

Mr Jim Kerr is the President of the National Association of Regulatory Utility Commissioners, NARUC. In this role, Mr Kerr serves as the de facto CEO of NARUC and, in consultation with the Associationís Executive Committee and Board of Directors, helps set the Associationís agenda and priorities. Mr Kerr is also a member of the North Carolina Utilities Commission. Mr Kerr graduated cum laude from Washington and Lee University and received his law degree from the University of North Carolina at Chapel Hill School of Law.

Article abstract

New technologies and the convergence of technologies that were once regulated separately raise a series of issues at both the state and federal levels. State commissions have statutory responsibility to foster competition, protect consumers and promote public safety and ubiquitous access to services. Broadband-based services have raised a great number of issues for the state commissions that regulate the sector, including copyright enforcement, net neutrality, access to government subsidies, privacy, spectrum allocation and cable franchising alterations.

Full Article

Consumers are now receiving video services through many non-traditional forums – on-demand and net-based television series, sports portals, movies, user-generated content, along with cable, mobile and other subscription services. Historically, unless you were renting a video from Blockbuster or another retail outlet, there were only three ways to get video: free over-the-air traditional television broadcasts, traditional cable subscription services, or satellite subscription services. This picture has changed dramatically in the past ten years. At the heart of this change is technological convergence, the presence of a vast array of technology to perform very similar tasks. In the regulatory policy arena, the term convergence is commonly used to refer to the synergistic combination of voice, data and video onto a single network. Most of the new players in the video markets are seeking to offer the best voice, data and video bundle possible using their networks. The new video outlets come in two forms. Some are copying the predominately one-way, cable subscription based model. This includes traditional telephone companies such as Verizon – currently offering a fibre-based subscription service – and AT&T, which has been promising a similar subscription service using DSL, digital subscriber line, technology. Other phone companies are offering satellite-based subscription services or have financed cable overbuilds to assure their bundle includes video. On the wireless side, Mediaflo is offering a one-way channel subscription service for mobile phone users. The other outlet for video is two-way broadband service. The United States has more broadband subscribers – 64 million as of June 2006 – than any country in the world. Level 3, a so-called carrierís carrier, recently reported that 50 to 60 per cent of the traffic across its Internet Protocol backbone is now video – up ten per cent from five years ago. Indeed, the most recent Federal Communications Commission numbers demonstrate the largest increase (35 per cent) in broadband subscribers occurred in the wireless segment. From June 2005 through June 2006, the number of these subscriptions increased dramatically, from 380,000 to 11 million. Ninty-nine per cent of Americans are living in counties where next-generation wireless services are available. Cingular was first in the world to deploy HSDPA, High-Speed Downlink Packet Access, the highest available state of GSM technology. Its system currently reaches over 100 cities across the country and offers speeds approaching one megabit per second. Verizon Wireless and Sprint have deployed the competing CDMA, Code Division Multiple Access, technology, which offers similar speeds. They hope, by the end of 2008, to offer that service to 200 million Americans. The US was also the first country to deploy 3G wireless networks. WiMax and WiFi are also spreading. In the past three years, WiFi has spread from 11,000 hotspots in 27 countries, to nearly 150,000 hotspots in 131 countries today – with a world-leading 50,000 of those in the US. As the broadband options for video download continue to expand, so does the range of related policy issues. Itís hard to pick up a newspaper today without seeing a story about one or more issues that impact these conduits for video. Indeed, in just the first four months of this year, the US Congress held 14 hearings on related issues. The issues facing State and federal policymakers impacting both consumers and service providers in this space include: ï copyright enforcement; ï emergency communications/homeland security concerns; ï net neutrality/non-discriminatory access to facilities and video content on the Internet; ï access to federal and state universal service and broadband subsidies; ï video filtering for indecency and violence; ï privacy; ï disabled access and captioning requirements; ï spectrum allocations for new broadband services; ï alterations to the cable franchising process; and, ï federal proceedings on consumer protections in a broadband era. The National Association of Regulatory Utility Commissioners, NARUC, represents public utility commissions that oversee the operations of telecommunications utilities in all 50 states, the District of Columbia and the US territories. Our membersí interests are necessarily restricted to a smaller subset of the listed issues by their respective statutory charges. A growing number of NARUC member commissions – currently 15 states representing more than 40 per cent of the US population – have oversight responsibilities for any cable service either through a state-wide franchise or by overseeing the negotiation of local franchise agreements. In all states, a government entity, either these commissions, another state agency, a local authority or a combination, provides vital services to the video market, such as managing rights-of-way, public, educational and government channels, build-out requirements, anti-redlining requirements, franchise fees and other public obligations. The FCCís, the Federal Communications Commissionís, statistics indicate cable service rates are lower where a second wireline provider enters the market. Our association remains interested in seeking ways to promote the entry of new competitors into the video marketplace. All NARUC member commissions have a statutory interest in the common infrastructure used to provide both substitutes for traditional telephony services and either dedicated video or Internet access services. The members have an obligation to foster unfettered competition in the intrastate communications market as part of their charge to implement state laws protecting consumers, public safety, and promote ubiquitous access to services. The commissions help implement the federal statutory provisions protecting competition by specifying carrier obligations to interconnect and provide non-discriminatory access to competitors. Federal law also urges the States – and requires the FCC – to promote advanced telecommunications services [47 USC. ß 151 note (Section 706) (1996)]. History, economics and common sense suggest that market forces can be relied upon to correct some problems, but certainly not all, such as fraudulent actors or anticompetitive behaviour. Policymakers have to strike the right balance between the two. There are also social policies – both federal and State – that market forces will either not address at all or will be unacceptably slow to attain the policy objective. Easy examples include law enforcement access to the network, captioning of video for the disabled, emergency communications, universal service policy, and issues of access for the disabled. It is impossible to address every one of the listed issues here properly. However, we can point out principles that NARUC believes should guide policymakers – both state and federal – in this arena. In 2005, NARUC adopted a federalism white paper designed to help federal policymakers analyze this issue. In the current environment of increasing convergence, video and voice platforms performing the same functions are subject to various modes of oversight – different rules and, at times, different jurisdictions apply – depending on the technology used. In some limited cases, this approach makes sense. For example, some aspects of a particular technology may require specific rules that are only relevant to that technology, e.g., spectrum management/interference rules for wireless, rights of way management/pole attachment rates for wireline. However, for general oversight of functionally equivalent services, technology-specific rules are not sensible. Ultimately, decisions about jurisdiction and oversight should be linked not to the particular technology used, but to the salient features of a particular service, such as whether the service is competitive and in what way consumers and small businesses depend on it. State commissions excel at delivering responsive consumer protection, assessing market power, setting just and reasonable rates for carriers with market power, assuring the interconnection of competing networks, and providing fact-based arbitration and adjudication of inter-carrier and consumer disputes. States also serve as ëlaboratories of democracyí by encouraging availability of new services and meeting policy challenges at grassroots level. An effective, pragmatic approach to oversight going forward, in the IP video or voice world, should recognize these strengths. To classify particular services, policymakers must ultimately find criteria that recognize legitimate consumer expectations and can stand the test of time as the underlying technologies continue to evolve. It is important to note that NARUC does not suggest that regulatory oversight is required in all cases. A number of states have taken steps to deregulate telephone service where incumbents were judged to no longer exercise significant market power. In the case of broadband services, relatively light-handed oversight has always been the rule. Policymakers must be responsive to these constantly changing conditions. If it is apparent the market is providing both consumers and competitors with an adequate level of protection, not only is regulatory intervention unnecessary, it is counterproductive. At the same time, however, history also tells us that market forces cannot, by definition, stop either fraudulent actors or anticompetitive commercial activity that enhances a carriersí bottom line. Certain social policies will require some level of government oversight at either the federal and/or state level. Therefore, it seems appropriate that both consumers and competitors have some forum available when disputes with a particular carrier cannot be resolved.

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