 Good afternoon, my name is Eli Dorado and I direct the Technology Policy Program at the Mercatus Center at George Mason University. It's my privilege to welcome you all to the Capitol Hill Club this evening for a timely discussion of the future of the FCC and communications law in the United States. Only one week ago today, the Court of Appeals for the DC Circuit upheld the FCC's open internet order, which applies title II public regulation – public utility regulations to the internet service providers. These rules have far-reaching effects of representing a significant incursion by the commission not only into media policy but also into social policy, including issues of free speech and the political process. Today we discuss not only this particular ruling, which for better or for worse, still faces a possible Supreme Court challenge and will quite possibly be made moot the next time there is a Republican majority on the commission, but also long-term visions for the future of communications law. What economic and social environment should communications policy foster? What should the FCC do? Do we even need an independent agency to affect the legitimate goals of communication policy? To begin our inquiry, I'm delighted to welcome one of Congress's leading voices on communication policy. Congressman Marsha Blackburn has represented Tennessee's seventh congressional district since 2003. She is vice chair of the House's Energy and Commerce Committee and has served as communications chair of the Republican Study Committee. The Washington Post has called her one of the 40 most interesting women in politics. It's an honor for us to have Congressman Blackburn here with us today. Thank you. And yes, I am thrilled to step across the street, if you will, and spend some time with you. Chuck Flint, who handles our telecommunications policy in our office, is over here with me this afternoon. And I hope those of you who are not following what we're doing, please keep in touch with us. Facebook, Marsha Blackburn, Twitter, Marsha Blackburn, also our website, blackburn.house.gov. And that's where you're going to be able to keep up with what all is happening in this space because we've got an activist chairman over at the FCC. I think it's fair to say he's kind of been the regulatory bull in a China shop. And as we were just discussing outside, the issues really are running the gamut, whether it's net neutrality or privacy or all-vid. You're seeing them be very aggressive. And so we have a very full plate. And this is, we're at a time where that aggressiveness makes its way into some of the actions from some of the FCC employees. And we had one employee bragging about spending, corralling $100 million of taxpayer money for an experiment, $100 million. And I think about that. That's a lot of tax dollars. And that's just the type activity that really ought not to be taking place. But when you've got an agency that just says, okay, the world is my oyster, what do I want to do with it? Rather than saying law defines and constrains and puts me into this certain space and refuses to exercise regulatory humility in the space that they have, then you do have that activism. Let's look at a couple of things and then I'm going to open the floor and take some questions before I go back across the street for a whip meeting and votes. Just as we were saying, the DC Circuit and the upholding the FCC's net neutrality rules that came out last week, the two-one decision, we know that this issue is going to head right on up the street to the Supreme Court. That is where it is going to be. It is not over with by any means. And, you know, we've got to go back when we look at this and go through the process of how we ended up with this Title II reclassification that more or less underpins this. And I want to just go back April 29th, 2014. Chairman Wheeler wrote a blog post that the DC Circuit court's decision and Verizon v. FCC, and I'm quoting, it laid out a blueprint for how the FCC could use Section 706 to regulate the Internet and that he viewed the court's ruling as an invitation that I intend to accept. Chairman Wheeler added that he was, and I'm quoting, concerned that acting in a manner that ignores the Verizon court's guidance or opening an entirely new approach invites delay that could tack on multiple years before there are open Internet rules in place. And so he clearly stated a preference to lean away from controversial Title II reclassification. And that was the old Tom Wheeler. Then you come to November of that year, November 2014. And Outcomes President Obama kind of opens up this discussion and says, well, you know, I prefer a Title II regulatory power. We think that would be a good thing. Well, and then coming out behind the president with that announcement, here you have the new Tom Wheeler that comes out on February the 26th, 2015. The FCC issued the open Internet order and we began regulating the Internet like a utility with a 1930s era law. Absolutely amazing. Especially when you go back and you think about how the Internet came to be. And that original foundation with four computers, four separate locations, the interface between those four, how they were networked, and, and stood on a platform of information share. And then you look at what comes about with the open Internet order. I, and some of you have heard me say this before quoting Professor David Farber from Carnegie Mellon. He was one of those involved in the initial project. And he said in a February 5th, 2015 article in the New York Times, and this was prior to the FCC's net neutrality rules being published, that Title II regulation of the Internet opens a Pandora's Box. Now that's to one of the guys that worked on the original project. Open source information share. And they look at it and say you can't go there. Progressive Policy Institute said the net neutrality rules will cost 11 billion in new fees and taxes. Their number, not my number. Their number. And this is why I have worked so diligently to fight against this order, HR 1212, which is the Internet Freedom Act. And we are so pleased that Senator Lee, and I think eight or nine over in the Senate, 2602, over in the Senate, they have the companion bill. And we are hopeful that a new president who will be elected in November is going to say, hey, those are good bills. Let's get them passed and onto my desk so I can sign them in the law. And we can recover this authority from the FCC. And I agree. We'll have a very different FCC. And I don't think it will be an activist FCC. I think it will be a light touch entity. Privacy. And let me touch on this. I have, as many of you know, I co-chaired the Congressional Privacy Caucus and also the working group that Energy and Commerce has had working with Peter Welch out of Vermont. And we have looked at the issues of privacy and data security. I've had the opportunity to hold roundtables from one coast to the other in the country to talk about this, getting input on how we look at the B2B relationship, the B2C relationship, what kind of rules should be in place, whether we need to be looking at opt-in, opt-out. And what kind of toolbox consumers need? Data security, looking at the issue of preemption. But the privacy issue, I've got to tell you, this is one that's not going away. And it's one that conservatives need to move forward. And we need to push for getting something on the books to deal with the privacy and data security. More of our constituents are being affected by breaches. There needs to be the federal preemption, some data security notifications in place. And while these issues started out with privacy over here, and you could say yes, that is an issue that you're going to primarily deal with from the website out to the consumer. And data security is primarily going to be on the backbone. I think that these two issues, the further we have gotten into this and the more time that is lapsed without congressional action, you see a melding of sorts of these issues, especially in the consumer's minds. May 15, 2015, the FCC issued an enforcement advisory that broadband providers should take, and I'm quoting, reasonable and good faith, their terms, steps to protect consumer privacy. Now, what is reasonable and what is good faith? Nice terms. Nice terms, not very descriptive there. Last October, I led a letter to Chairman Wheeler that was signed by 15 members of the Communications and Telecom subcommittee. It included Chairman Walden. Warning the FCC against taking such action on March 10, the FCC issued an NPRM requiring broadband service providers to disclose how they collect consumer data. In particular, I believe the FCC's entry into the online arena as a privacy regulator is very troubling. They are outside of their scope. And the definition of their mission when they get into the privacy arena. I think there are three main reasons. First and foremost, the FCC has traditionally been our government's sole internet policy regulator. Having dual entities regulate online privacy is going to create confusion as pieces of the internet ecosystem would potentially be subject to different rules. And now, not to be left out, the CFPB comes along and says, we want a piece of that action. So think about that. Just think about it. You could end up, if this administration has its way, with three separate regulators and 50 states with state regulations. This would be a mess, an absolute mess, more so than it is. I think this is the type action that will not facilitate the continued development of an internet that Chairman Wheeler has referred to as, and I'm quoting again, the most powerful and pervasive network in the history of the planet, end quote. Moreover, his comments imply that the FCC regulation thus far has been successful and ought to continue, which ultimately undermines the rationale for added FCC regulation. If the FTC is doing their job, why do you need the FCC? Second, the FCC has perceived a grant of authority to enforce consumer privacy pursuant to Section 222 was done unilaterally. Republicans routinely voiced concerns about title two reclassification and the sweeping regulatory powers the Commission would have at its disposal throughout the net neutrality rulemaking process. And third, the FCC does not have the requisite technical expertise to regulate privacy. FTC Commissioner Joshua Wright testified before the House Judiciary Committee that the FTC has, and I'm quoting, unique expertise in enforcing broadband service providers obligations to protect the privacy and data security of consumer data. Commissioner Wright added that the FCC's entry as a privacy regulator will create further obstacles to protecting consumers in fostering competition by depriving the FTC of its longstanding jurisdiction in the area, which it has engaged in over the last two decades. Classic power grab by the FCC. The FCC has given itself the authority, and it is arguing for a solution that is one-sided. In essence, the FCC's privacy notice of proposed rulemaking is focused on the one part of the internet ecosystem that doesn't actually have broad visibility into consumers' information online, and that is with the ISPs. These concerns are not just Republican concerns. Professor Peter Swyer at Georgia Tech, who served in the Clinton administration as an expert policy advisor and who also served President Obama, released a study on what companies have access to consumer information in the internet ecosystem. His report clearly showed that ISPs, the target of Chairman Wheeler's new privacy rules, do not have the level of visibility into consumers' online activities that most edge providers have. For these reasons, I filed an amendment to the FSGG Appropriations Bill to prohibit funding for the FCC to enforce privacy restrictions against the ISPs pursuant to Section 222 of the Communications Act, and we will have that amendment on the floor this week. All right, Muney Broadband, the FCC's decision in February 2015 to grant the petitions of Chattanooga, Tennessee and Wilson, North Carolina, allowing the federal government to preempt Muney Broadband restrictions in those states are troubling. Now, I think if a state chooses to encourage, restrict, or prohibit buildings of such networks, that's the decision to respect. If they're for it, they're for it. I'm not necessarily for it, but I think a state and the localities have the right to make these decisions. I do know that a lot of the Muney Broadband networks fail, and there's a Forbes piece that went through and detailed some of these. In Utah, the Muney Broadband Network, which they appropriately named Utopia, ended up with over $350 million in debt, and then $146 million in negative assets as of July 2013. There are other projects like the Memphis, Tennessee project, $27 million in the whole, Burlington, Vermont, $17 million in debt, and the list goes on and on. Muney Broadband networks claim that ISPs dislike competition in the Muney networks promote that. However, I think their logic is flawed. It's the government's job to create an environment that encourages competition, not to create an environment where government is the competition. And that is what will happen. It has proven and shows that it is not a successful approach. And the fact that you've got the FCC trying to continue to pile on debt and push through on this is of concern. The solution is the State's Rights Muney Broadband Act of 2015. Senator Tom Tellus has it in the Senate. I have it in the House. And we are working to prevent the FCC from using Section 706 to override the states and put the Muney Broadband restrictions in place. Let me touch on the all-vend, the set-top box. The Downloadable Security Technology Advisory Committee issued its final report on technical issues related to the development of downloadable security systems that could facilitate delivery of video programming over third-party devices. One of the proposals would allow the MVPD service to be disassembled into individual piece parts that any retail device manufacturer could selectively reassemble into a new configuration and a new service. So now think about this one. It means if you are a content creator living in Nashville, Tennessee, or working in Tennessee, that creates more cable TV programming than any other state in the country. Think about what that means to you and to the people that you employ and to the innovators that come up with new concepts and develop those concepts and look for an outlet to get those concepts into the marketplace. It is a troubling concern. And let me tell you, the problems that exist, the way it violates licensing terms, the way it makes it very difficult to license content, I'm hearing a lot about it every time I'm at home. Whether I'm going to the mailbox, whether I'm going to church, whether I'm stopping for coffee, I am hearing about it from people that are in the music, the video, the TV and the film business. They're very concerned. At our November hearing, Chairman Wheeler committed that his set-top box proposal would honor copyright law and programming agreements. Right. The text of the proposal, which was released a few months after that hearing, suggests otherwise it would mandate that pay TV providers transmit third parties all the programming, all the programming, the pay TV providers license, allowing third parties to use the programming without obtaining the permission of the copyright holders or compensating them. The proposal also explicitly declines to prohibit third parties from replacing or altering advertising or manipulating the content. Think about that. Think about that as an Article I, Section 8 issue. The proposal exceeds the FCC's authority and creates conflicts between commission regulations and copyright and contract law. I thought Commissioner O'Reilly's dissent had an interesting line. He said it was regulation by pure speculation. That is spot on. So we have a very activist FCC. I know you all are set to have a fabulous panel this afternoon. I am thrilled to be here with you. And now that you've heard from what the committee's up to, you can hear from the real experts and see what is going to take place about it. Thank you for letting me pop in. Thank you for your interest in the issue. I appreciate it. Thank you, Congressman Blackburn, for those excellent remarks and for getting us off to such a great start this evening. Next on the agenda, we have what promises to be a lively panel featuring some of the sharpest thinkers on communication policy in the world. And I ask them to come up and get mic'd up while I introduce them. Fred Campbell is director of technology and an adjunct professor of space, cyber, and telecommunications law at the University of Nebraska. In the past, he has been chief of the wireless telecommunication bureau at the FCC and wireless legal advisor to FCC Chairman Kevin Martin. Fred has also served as an Arab linguist in the 101st Airborne Division of the U.S. Army. Roslyn Layton is a Ph.D. fellow at Alborg University in Denmark and a visiting fellow at the American Enterprises Institute's Center for Internet Communications and Technology Policy. She has been a prolific contributor to both domestic and international debates over communications law. Hal Singer is a senior fellow at the Progressive Policy Institute, a principal at Economists Incorporated and an adjunct professor at Georgetown University's McDonough School of Business. Hal earned his Ph.D. in economics from Johns Hopkins University. My colleague Brent Scorup is a research fellow at the Mercatus Center at George Mason University, where he focuses on telecom and media policy. Prior to his time at Mercatus, Brent was a research director at the GMU Law School's Information Economy Project. And lastly, moderating our discussion this evening, I am pleased to introduce Doug Brake. Doug is a telecommunications policy analyst at the Information Technology and Innovation Foundation. He specializes in broadband policy, wireless enforcement, and spectrum sharing mechanisms. And as it seems that we are almost done, I will turn it over to you, Doug. I'm hoping we can kick it off with a few sort of general questions, get the thoughts of the panelists. First, Hal, I'm hoping you can sort of set the tone for the panel. You have been critical of the FCC, especially the FCC sort of lack of economic rigor, economic analysis. Do you have particular examples in mind? Why do you think it is that the FCC doesn't engage in sort of a deeper economic analysis? Or feel free to go off whatever you prepared anticipation for the panel. I can handle that. Yeah, I think that if you want to know what's going on in terms of economics at the FCC, you just need to read Justice Williams' dissent, where he chastised the FCC for basically ignoring the Council of Economists, including the three prominent prior FCC chief economists. And he got them for so many other things. I mean, one, and it sounds small, but it's kind of big, where they relied on four citations to the economics literature and none of the articles that they cited supported the proposition that a ban on paid priority was going to generate the benefits that they claimed. And the question is, why would you do something like that if you were a law student and you submitted a paper that way, or you did a brief that way, you're getting big trouble? And what I find very interesting about the whole process is that it exposed a very big gap in the system. That is, there is no checks and balances on the FCC. You know, the majority or two of the three justices said that they should defer to the expert agency so long as the agency, quote, gave a reason for its position. And I was thinking about how silly that was. You know, my daughter, my middle daughter is a very good kid, but sometimes she's on her phone at 11 o'clock at night. There's very compelling content that she's following. And I can imagine asking her why, getting a reason and going down and telling my wife that she provided a reason, you know? So I couldn't tell her to put the phone away. So a reason can't be the basis for, it can't be the legal standard by which an agency is oversight is brought to an agency. Now, so the DC Circuit shirks its responsibility to oversee the agency. And the agency issued a companion statement alongside the open internet order in 2015 saying that we have no obligation to conduct cost-benefit analysis. They never bothered to estimate what the benefits of a ban on paid priority was relative to a less restrictive case-by-case alternative. And they rely on a piece by a consumer advocacy group that purported to show that the last time Title II was tried on telco providers would actually cause them to invest more during the dot-com boom. So they basically kind of flipped their nose at economics and cost-benefit analysis. So the question is if the courts aren't gonna do it, if the FCC is gonna make a mockery of economics, who's gonna do it? Who's gonna oversee the regulator, regulate the regulator? And now it's kind of, it's obvious to me there's only one solution left and it's Congress. And so my plea is for Congress to intervene and to pass a rule that would basically require the FCC to engage in serious cost-benefit analysis of the same kind that's engaged in by the Environmental Protection Agency, or the Department of Labor. And what's interesting is those agencies not only have to engage in it, but their cost-benefit analysis is actually subject to peer review by academics in the field and then subject to court scrutiny. And the question that I pose is why should the FCC be subjected to a lesser standard? They're dealing with the tech industry for God's sake. I mean, this is an important part of the economy. How could it be deemed any less important than other areas that are being regulated? So I'll leave it at that, but that's my plea. If Congress could solve this thing, that's the way, I think, to inject economics is to force the FCC to engage in serious cost-benefit analysis. All right, so Fred, if we could turn to you, you have some experience, the FCC, former Chief of the Wires Bureau, that's great. And I'm curious what you make of all this. It's, we have a, on the one hand, we have a chairman, chairman Wheeler, who has this mantra of competition, competition, competition. But it has to be believed, you know, somewhat lacking on the actually economic analysis. So how do we square those two things? What's missing from this picture if it's supposedly all about competition? Well, I don't think it's all about competition. I think that's what's being said, but there isn't a consistent analysis of competition going on at the FCC, as far as I can tell. I'll give you an example of the set-top box proceeding that Representative Blackbird talked about. One of the justifications for that proceeding, according to its proponents, is that there's a lack of competition in set-top boxes. At the same time, Congress expressly defined competition in the context of the MVPD marketplace, or specifically cable. And in 2015, the FCC found indeed there is effective competition among MVPDs or cable and satellite TV operators to get away from some of the jargon. If there's effective competition among your cable and satellite TV providers, there is at least as much choice for the boxes as there are for the providers. Unless each provider's providing the same box, as far as I can tell, none of them do in any given market. So Comcast has a box and Direct TV has a different box, and Dish Network has yet a different box. And the consumer can choose among those three providers. The FCC says that's effective competition, and what that means is, the FCC says, therefore they can't charge excessive prices. The argument for the set-top boxes, which there are also three different set-top boxes, or more, there's actually more that you can choose from. If you read the report that came out of Congress, I think headed by Senator Markey, and then the FCC references in the NPR, and they're saying, oh, they're charging too much for set-top boxes. My point is, is those two theories are completely antagonistic to one another, completely inconsistent. So I don't really think it's about competition. The only consistent thread I can find, it logically consistent sort of rationale that cuts across the FCC's current trifecta of proceedings and proposals, net neutrality's done. But what can I say is consistent, competition-wise, about net neutrality. The discriminatory application of privacy rules by the government, one set of rules for one set of players, and a different set applied by the FTC for another set of players, and the whole set-top box proceeding. All three of those proceedings give market protections, protections from competition to edge providers, or so-called edge providers. So if all three go through, edge providers that engage in the big data market won't have to worry about competition, or at least competition on the same terms, from ISPs. With that neutrality, they don't have to worry about any sort of competitive negotiations or contractual negotiations with ISPs. And with set-top boxes, it's probably, it's the most shocking of the three. They'll get to, according to the FCC's initial proposal in any event, they'll get to access programming that others are paying licensing fees for without paying any licensing fees. They'll be able to use consumer data about what they're watching and paying for without being subject to rules that otherwise would apply. And they'll get to profit off of this and sell ads without paying any of those fees being subject to any of these privacy obligations. As far as I can tell, there is a competition angle here, but it's an anti-competition policy, anti-competitive policy. If you go back to what they call the Kingsbury commitment, minutia, but basically economists on both sides of the aisle of every stripe have agreed that we ended up with a telephone monopoly because the government helped create it. And I think what you're seeing here is the government helping to ensconce market power that may or may not be held by certain edge providers who have 80 plus percent market share in their relevant markets, and they're protecting them from the potential for new entrants and competitors to disrupt their position. So I call the chairman Wheeler policy Kingsbury commitment for the 21st century. Very good, very good. Rosalind, if we could turn to you living in Copenhagen and doing such great work looking at the international perspective. So can you help us out with that? What sort of impact does sort of this FCC's decisions, do the decisions by FCC have abroad? How is this FCC viewed from the international lens? What do you think the implications are of the Title II classification? Well, I just want to start by saying to thank you so much for this invitation to join you a week after the decision. It's nice to be with friends and colleagues. I think we all feel a bit, not just post-mortem, but a funeral for the free internet that we, the black, I feel like I should have worn black. And also feeling like sort of mourning the death of economics. I definitely, this discussion that the outgoing FCC economist himself said this was an economics free zone. It's a funny comment that the FCC was boasting about having the toughest rules because the EU said that they have the toughest rules. So I'm not sure if this is the race to the bottom, how you actually make things better with the toughest rules. But in any case, what is perhaps so, I think your point, Hal, about making some standards that there should be a peer review, why not have peer review? And especially being an academic institution where we are teaching future telecom regulators, we actually teach them these tools. And I sort of feel like, why are we bothering that? Because in the end of the day, if the decisions are just made by advocacy and lowering, why are we trying to teach them to do the analysis? How do you define market power and market entry? And how do you do these things if it's just all about who can win a political argument? But in any case, where are we around the world? There are 50 countries with net neutrality rules. They're growing. The interesting thing is that they make their rules essentially two ways. They use soft rules or hard rules. Overwhelmingly, countries use legislation. And that's kind of an interesting point because the US is unique in taking a heavy-handed regulatory approach. The only other country like us is Canada. They only have these net neutrality rules on wire line. They don't have them on wireless, but the Canadians are now in the midst of conducting a hearing to bring it over to wireless as well. The appeal by Belmobility in Canada to defend being able to create competition in the wireless market was struck down on appeal. So it's not sure what will happen there. So you have the US and Canada as unique as the only countries in the world who've taken the telecom approach where essentially the telecom regulator creates rules as it sees them. Most of the countries in the world use a legislative approach where the people go to the Congress and ask for the rules. And actually, by that perspective, the EU rules are tougher in the sense that they're more politically sustainable because you have all of the branches of the EU government, the parliament, the commission, and the council, which is the heads of state of the EU 28. So there was a political consensus to make a set of rules. They're quite close to the US. The difference is there in the EU that the body of the European Regulators for Electronic Communications, BAREC, that's the organizing body of all the regulators in the EU. They are now creating implementation and sort of in the great connected world that we are, the same activists who succeeded to get the rules the way they wanted in the US are now or have been for quite a long time. The same, save the internet advocacy. They've just copy pasted their materials and they use them in Europe. It's the same campaign, they just change it to save the internet.eu, produce it in the local languages. So it's the same advocacy organizations driving these rules around the world. Then you have a set of Latin American countries who also have legislative approaches, and which is very different from the countries who've had soft rules, quite interesting. The, if you actually looked at what Tim Wu talked about, this user rights and no interference, the countries that have soft rules, the Nordic countries, the UK, Switzerland, Japan, South Korea, they have essentially had sort of codes of conduct, self-regulation, principles, multi-stakeholder model where operators voluntarily agree to uphold certain standards. And those rules have been on the books for the longest period of time with essentially little to no violation. So I think the saddest opportunity here is that we have had, we have a data set now of many countries that have rules on the books. We've had a natural experiment for over five years with different approaches to manage this issue, and we've sort of thrown that out the window. And no one has bothered to say, let's look at countries that have done it this way and countries that have done it that way, and who gets more innovation? I mean, that would be a great policy discussion to say which one has produced, had made things better for the edge providers or what have you, or had produced things, what's better for the consumers? So in any case, that is FCC is definitely not up to task in that respect. But fortunately, I've been able to, for the last three years, been worked on a grant with the Danish Innovation Fund. So I have pieced together what could be a framework to begin to look at that, but that actually means that you need to measure your ecosystem, you need to define, you need to define the innovation in the marketplace. You have to track things before and after the legislation. And so I'm publishing my research soon, but what I've looked at is grouping these different countries by their sets of rules based, and then studying them by the various outcomes in the marketplace. What's most interesting is to compare two similar European countries that have, they're very similar in every way except they're net neutrality rules. So for example, Denmark and the Netherlands. Denmark, which is, I've lived there for six years, I lived in Holland as well. Both very developed countries in terms of their broadband, many networks, highly educated, people speak multiple languages, both have lots of engineers and developers, lots of apps in the marketplace, lots of smartphone development. But the very different thing is you had a country like Denmark, which in 2011 said, we're gonna have self-regulation. We don't want, we have success with that. We're not gonna add more, we're not gonna regulate this issue. And the Danish operators actually made a higher standard that created quality guarantees and so on. And then you have a case like the Netherlands where in 2012 they imposed a hard regulation. Interesting thing, here we are four years hence. The amount of the local internet innovation in the Netherlands has declined since they adopted their hard rule approach. Interestingly, in Denmark on the other hand, with self-regulation has actually increased the level of apps and even increased new kinds of app companies. So today the largest mobile app provider is larger than the entire Dutch mobile ecosystem. One company, one Danish company which is making games for mobile phones is bigger than all of the top Dutch apps. It's extraordinary how you can see. But this is just so that even the edge providers themselves wouldn't have investigated that empirically before they signed on to these kind of rules. So I think the economics soon will hit us in the face because as we go forward, if you're looking at the various, where is innovation going on now? You can look at Japan, South Korea and China which China now surpasses the US in mobile app revenue and in downloads. And those countries don't have these kind of rules that ban technologies. They allow bandwidth reservation systems. They allow prioritization systems. They allow these kind of things. And if you wanna think about how do we make the next generation of mobile apps better, improving the audiovisual quality and making those things, those countries now have the advantage to do it because they're not banning those technologies. So if you wanna look at the future, the mobile apps will not be made in the places where the bands are in the technology. They'll be made in the places where the innovators can experiment and do things. So I think we have done something so stupid for our future in terms of the mobile ecosystem and certainly broadband overall. Thank you Rosalind. Brent, if you could back clean up for us. You had a very nice piece come out yesterday in the national review laying out sort of an argument that I feel like you've been building for a while about how oftentimes sort of policies that the FCC might couch in a sort of fairness analysis really end up becoming more about government control. Can you spell that sort of argument out for us and the sort of implications of some of the decisions the FCC's been making? Yeah, thank you. And in that I couldn't go into too much depth, but I'll try to expand upon that here. But in my national review piece, well your common, I think your common net neutrality person is interested in is concerned about what could be termed traditional antitrust issues. So they don't want an ISP to abuse their dominance. They don't want them to throttle competing video providers. They don't want them to act any competitively. That's not what's driving the net neutrality movement and that's not what's driving the FCC. And I'll point you to Tim Moose words himself. He was, because this was asked to him by a member of Congress, why can't antitrust agencies handle these issues you're talking about? He said, net neutrality is about giving the FCC the tools to control social policy and the political process and issues of free speech. So I don't think it's a coincidence that there's a feeling that the FCC is not relying on economics. And as Rosalind said, the chief economist at the time said, antitrust is an economics free zone. That's pretty startling for Title II, which is based on the idea that the FCC needs to regulate the long distance AT&T monopoly. Title II has always been founded on the idea there's a natural monopolist and the FCC needs to promote access to that network. So this transformation is a long time coming. And I think this is a full embrace by the agency to get involved in cultural policy and social policy and broadband networks. I mean, they're doing video, they're doing internet of things, they're doing email, Facebook access, and this gives them, for the first time, sweeping authority over all these converged services. Yeah, I'll note, I mean this, once the FCC does embrace its social role, I mean, you see suggestions of this back in the days of the Fairness Doctrine. And so in 1966, before kind of media access school, this idea that the public should have access to these broadcast networks. In 1966, there were 400 Fairness Complaints. Fairness Doctrine had been around since the 40s. By 1970, there were 60,000 Fairness Complaints. And this gives the FCC a lot to do. I mean, the Fairness Complaints dominated, broadcast issues dominated their job for many years. And so I see reminiscent of that in what the FCC has done with Title II, especially it's known reasonable discrimination rule, which is kind of a catch-all that kind of captures much of the other rules, the no blocking and no paid priority. So it's pretty alarming. I suspect we won't see much more economics coming out of the FCC as it goes down this path of broadband regulation. All right, so I wanna start sort of guiding the conversation at least towards the direction of possible ideas for reform. But I think part of that, we should try to spell out and identify the specific challenges that we want to address. And so just to run through a few threads that I've seen, trying to identify particular challenges, first of all, we're dealing with just an outdated law. The FCC is improvising with the tools that they have to impose the regulations that they see fit for better or worse. And so there's outdated regulations. Fred was commenting on the possibility of sort of regulatory capture by particular entities. And so perhaps there are questions of institutional design, of how the FCC actually operates and interacts with the firms that it regulates. There's another question of sort of the role of activists versus the sort of telecommunications experts, that's another question. And then I found it kind of interesting, representative Blackburn likening Wheeler to a bull in a China shop. And so I wonder to what extent maybe some of these issues we've had at the FCC are specific to this particular chairman perhaps. And so I don't know, just sort of throw all of those out there for the panel, anyone who wants to jump on that, if you could prioritize or particular comments on what, you know, the number one challenge you think is out there. I can jump in. We're in the midst of a paradigm shift in my view. And I think that's some of what Brent was saying and everyone else was saying. Part of it is due to the technological change represented by the internet. And part of it is due to the current FCC's express rejection of the 1996 act, the Telecommunications Act of 1996. What am I referring to? There were certain sort of built-in limitations in the 1934 act and the Cable Act on what the FCC could do in part because there were limitations on the technologies which is why you had a siloed title approach. The 1996 act moved away from that and said our guide star or load star or guiding star is gonna be competition, right? And by that promoting competition and it indicates largely through deregulation, both of those things have now been completely disrupted. The siloed model is disrupted by the nature of the internet which the FCC hasn't grappled with. Nature of the internet being it can provide telephone service, it can provide video service, it can provide new types of services that really weren't possible before. By not grappled with. First amendment played a huge role in limiting the FCC and what it could or couldn't do with broadcast and then with cable and satellite TV. The net neutrality order largely rejects that and to my surprise the court at least in part appears to have rejected that I think wrongly. So the convergence issue eliminates some of those natural technological and service-based restrictions that once existed. The second part is what people have already mentioned which is the FCC said we don't need to look at, we don't need to do a competitive analysis. So if you don't have the traditional technical limitations and what I'd call silo limitations, why is internet video delivery regulated under the telephone title rather than the video title? I don't know, but that's what the FCC's doing. So the silos have been swept away. And if you sweep away the competitive analysis that seems to be envisioned by the 1996 act, what you're left with is nothing, a vacuum, right? What you're left with is the public interest standard which is apparently a reason. Whatever that reason is, it's whatever reason the current FCC wants to provide. So that to me is the number one problem. And this is very much echoing what Hal said. Congress needs to step in and say what the new load star is going to be because right now there is none as a practical matter. Well I think that the fundamental problem is that the 96 act doesn't really speak directly to how the FCC should regulate the internet. There's some language in the preamble that suggests a light touch approach or deregulation but other than that, there's nothing there. So you have an act that was really written for different types of services, local access services that are in local telephone services that are largely fading away. And so there's a natural inclination for the FCC to kind of become out of date or redundant itself. Some agencies like the Civil Aeronautics Board kind of saw this happening and they had kind of the dignity to step away. But obviously Chairman Wheeler, that's not in his DNA. He wants to kind of lash about for some mandate and he's kind of latched on to this populist wave and the populist wave has given them kind of a new breath of life. To get concrete as to how I would fix it. And I was peddling a compromise back in February of 2015 when I saw that we were heading towards a bad state and I think that this compromise is now even harder to get done in light of this major victory for what I consider to be the far left. And that is to give the FCC a specific authority to regulate the internet in a light touch approach in some title outside of Title II. Some statute that's outside of Title II. And if you're looking for a template as to how this light touch should work, I think the overarching framework should be no bans. Bans ought to be gone. Bans on paid priority or bands on payment for interconnection. Bans just should be stricken from the FCC's DNA. What instead should govern, the governing principle should be an ex post and a case by case approach. And this could apply to all forms of preferencing that an ISP could extend to a content provider. I get crazy when I hear that we need this type of rule, a ban for zero rate or a ban for pay priority but we're gonna do case by case on zero rating and we're gonna do case by case and interconnection. These are all forms of preferencing that an ISP could give to a content provider. Some sorts of preferencing are good and some are bad and so you have to examine them all on a case by case basis. That ought to be kind of the kernel that kind of guides the FCC forward. So the question is, and I'll wrap up. I mean, why would a Democrat for example ever go along with such a compromise? Now that they've secured this kind of their ideal state. The notion of cost benefit is anathema to the far left. The notion of case by case is anathema to the religion. It's not anathema, by the way, to a centrist Democrat. It's not anathema to a moderate or to an independent. But I think now getting this deal done becomes very, very difficult. I heard Matt Wood on C-SPAN debating Fred and saying that, you know, if we're gonna give up anything, if we're gonna talk, if we're gonna negotiate, it's gotta be from where we're starting today. It's gotta be something better than what we have today. So I can't imagine how I could sit down across the table with Matt Wood and negotiate to a new source of authority to regulate on a case by case basis. So there's gotta be some kicker and maybe I'll come back to this later, but there's gotta be some kicker that the Republicans would offer up to the Democrats to make it more palatable. Let's say we're on convergence and they're good-sized and bad-sized convergence. I mean, I think on the good part, after the 96 Act, Congress kinda recognizes that TV is not natural monopoly, phone is not natural monopoly. You can allow providers to go back and forth in what they provide. And it's one of the great untold stories of deregulatory success. I mean, for instance, for decades, from the 1900s onward, I mean, 1910s onward, it was assumed local telephone service was a natural monopoly until the 96 Act, where Congress says, we don't want this to be a natural monopoly anymore. Let's allow competition in slowly. Competition actually came from a place they didn't really anticipate. It was the cable companies and cellular companies. Since 2000, the local phone monopolists that were supposedly this natural monopoly have lost 100 million home subscribers since then. I mean, more people get phone service from their cable operator than from their phone, local exchange carrier. Now, I think that's amazing and even more get it from cellular carriers. You know, video, likewise, not quite as a stark, but cable in the 1990s had 94, at the time of the passage of the 96 Act, cable had 94% of the subscription TV market. Today, it's approaching 50%. And a lot of that is satellite companies and phone companies. That doesn't even include the Hulu's and Netflix's out there. So, convergence has been great for consumers and the FCC, the Clinton FCC in 99 had this great statement about the FCC in the 21st century, which said, essentially, as competition comes in, it will lessen our need for direct regulation. And that seems to be in the garbage now. But, and so on the negative side of convergence, because Congress didn't get rid of the silos, so the Communications Act has three big silos. You've got Title II, Telecommunications Service, Title III, Broadcast Services, and Title VI, Cable, or MVPD Services. Those are still intact and there's a lot of confusion and it contributes to the First Amendment mess that we have. Justice Thomas called it a doctrinal wasteland because you have these contradictory statements about who is the common carrier. And basically at this point, all providers are quasi-common carriers. And Rob Frieden, Professor Rob Frieden has noted this kind of alarmingly that common carriage has died away and in its place, we have quasi-common carriers and it's made a mess for the FCC too and for the courts to adjudicate. And unless Congress comes to terms with this, that these silos are doing a lot of damage to the First Amendment, two principles of common carriage, I don't think they'll see the need for getting rid of these silos, but it needs to be done. If I may note, we're hoping to have some time for Q and A, so we'll be thinking of questions and prepare for them. So the challenge I would suggest that what we have lacked, what this debate has lacked at least from those on the side of the economic, who care about the economics, is we've lacked the thought leadership. I think at the time, listen, Tim Wu is a poet, right? We've got to give credit where credit's due. He, what's interesting, I think Fred talked about paradigms, there's a paradigm going on around the world in telecom regulation. In the last generation, the number of, there've been a hundred new telecom regulators established with a singular goal to privatize a national telephone monopoly. And essentially when that's done, you close the shop, that's the idea, you've done your job. But essentially, Tim Wu helped the regulatory to breathe new life, to give them a new job, right? Because as we saw it, the competition was all over the place. All of the whole point of the telephone monopoly is going away. So essentially what we call a challenge, find the job is done, this, from the other perspective, this is a new opportunity. What are we gonna regulate now? Because we've deregulated the state telephone monopoly, what's left? So what's interesting is from, I would just wanna give a European perspective and sort of from OECD countries, how they, because you don't have to look at it the way, it's not incumbent that the solution that the FCC came up with is the way developed nations have to go. Do you have to reinvent your telecom regulator? Because in fact, you could do something different. But there has been a sort of, as Fred correctly said, this is the kind of the telecom regulatory model looking at economic regulation has kind of outlasted its life. We're now in convergence, we're in a new century. This sort of thing about micromanaging the network doesn't pass anymore. And interestingly from the European perspective, their resurgence just before, in the last decade was, we're going to create competition by reselling. We're gonna create all this open access and that's gonna be this ladder of investment and help all kinds of new entrants. We'll open up the network and all these competitors will start reselling services and then they'll invent their own networks and so on. Well, after the financial crisis in Europe, which they still, all the European nations still haven't recovered from, the telecom regulators woke up and said, gee, this open access stuff hasn't worked. We don't have these networks all over the place. We're all, 75% of our broadband connections are still on copper. We have not created these new networks that this theory has promised us. So we need this approach isn't working. So this either you dig in again, go back to the stuff that didn't work or you say, okay, well one option that some countries may say is okay, well we have to take the public money and invest in the broadband networks. Well, to some extent that doesn't happen in the EU because there are laws about that restrict too bad representative Blackburn isn't here but there are actually laws that protect, you cannot, the government cannot operate where private companies are already present. So they are very strict laws about, you cannot add subsidies in places where there are private companies because it's not considered fair competition. So there are these various grades about different sort of areas. They only allow subsidies in certain cases. So that's one model to look at. But another model is, so I wanna give the case of Denmark which actually in 2012 dismantled their telecom regulator altogether. Did it overnight by the center left government. The new president came in and she's just said, we don't need this telecom regulator anymore. These employees, we're gonna redeploy them across four different agencies. The laws are still on the books but we have achieved our goals in terms of creating the broadband networks. Now what they did however that filled the vacuum that was important was that they made another progressive project if you will that actually has been successful from the Danish perspective which is they said we're gonna digitize, we wanna be the most digital nation in the world and by the ITU's measure they are, there's an annual study about digital nations. And so what they said is we're gonna create a set of digital tools which would be a digital signature. We're going to have one set of sign on for things. We're gonna give you these, we'll create these various tools to reduce friction and they'll be there if different organizations want to use them and that will be our kind of gift to the Danish society. So cashless society, seamless connectivity for the doing lots of public e-government solutions online and so on. So that's actually been successful for a small country and what I would argue is that there was an intellectual discussion around that would be the way to enable because the government became a buyer of a lot of IT services. It is in a small country, it is one of the key buyers. So this process of digitization has helped to drive the broadband development, increase the investment and so on. It's not a strategy that works everywhere but they had the foresight at least to say okay, there's different ways the government can be involved. You can be involved by regulating the internet once it's made or you can be involved and say we're going to digitize our government services and that will be our project. So what I would say is our challenge is that we need to come up with the meaningful, evidence-based, economic-based thought leadership about what is the progressive project, if you will, or what is the project that is meaningful for, you know, in this way. That would be better and different than having the FCC regulate the internet. I don't know what that is but I think, you know, we live in a world where ideas matter and unfortunately, bad ideas matter a lot because they cost a lot of money. So I think for those of us working in this space where we're studying, it's incumbent upon us to come up with the better ideas. Thank you. So I think now time to check in and see if we have any questions from the audience, I believe. We've got a mic lined up if anyone wants to line up and ask a question. If not, I have more. Please. What's your kicker? Ah, the kicker. Glad you asked. He was planted here. So and to back up, the kicker is how are you gonna get Democrats to take a new source of authority to regulate internet providers' preferencing along the lines of the 2010 open internet order if they've already got something stronger. And my preference or one idea that I wanted to put out there is the notion of a subsidy for low income households to get access to broadband that would be paid for via the general treasury. In the absence of such a subsidy, Mr. Wheeler has made it known that he's going to fund it himself and he's gonna fund it via a tax on broadband services. Now this is crazy, the notion that we're gonna tax broadband in order to subsidize it. We're literally gonna be driving marginal households out of the market via the tax so as to raise funding to subsidize other marginal households, right? I mean, if you'd say this in an economics class, you'd get a D minus. And that's what the teacher felt generous that day. So I think that we have a big gap in terms of adoption and it's a bigger gap than what can be sustained via the current lifeline program. And if you're looking for a sweetener or a kicker that might attract some Democrats, I think that a subsidy for low income households funded through the general treasury and therefore not as distortionary at least as a direct tax might be something to encourage them. Can I address the kicker? Absolutely, I'll please you. Respect everything Hal just said. My kicker though is that we've been looking at these problems way too narrowly. So narrowly that we've entered a not just economics-free zone but a reason-free zone. We have left the age of reason and entered something new. And I'll give you an example of what I mean by approaching these issues far too narrowly. I left vague what replaces the silos and the competition paradigms that I asserted once existed. But part of the reason I left it vague is we're not even discussing what I think are probably the relevant issues. Example, recently multiple papers have shown that search engines with a lot of market power can sway elections by up to 20%. I am not vouching for the accuracy of these papers but I did note that this didn't seem to raise any cry whatsoever, no one cared. Facebook has admitted multiple times that they have not only experimented with their users to influence voter behavior but were successful in doing so. Why is that relevant to my point about we're leaving this far too narrowly? For a very long time, we have had a communications act that places structural limitations on media companies that prevent them from any one company from amassing enough power to even present these types of issues. So for example, once hard law if you will but mostly a rule of thumb today the communications act does require a limit but no cable company is allowed to have more than 30% of the nation's cable subscribers. Point being, to the extent Comcast can influence voter behavior they can only influence up to a maximum of 30% of voters. Broadcasters are subject to all kinds of structural limitations as well. No particular broadcast network can reach more than X amount of the people. However, it's now been proven time and again that edge providers have the ability to influence voter behavior there are no structural limitations whatsoever. Even more interesting. They don't just have enormous numbers of users regular users in the United States. Facebook has a one point more than 1.4 billion users worldwide. Is it any wonder that this paradigm shift is occurring worldwide? There are companies with a worldwide or global interest in this. What I am suggesting is we have a set of communications laws that whether you like these structural limitations or not there are lots of arguments against them but that has a whole bunch of built in assumptions about how we do these things. We're very focused on making sure all of these apply to these companies that have a very limited amount of power and yet this other set of companies are free to do whatever they like and no one's even talking about it. We're doing it wrong. That's my kicker. Well, I don't know something you said about the subsidies. I mean, I think you'll find economists on the right, left, and center who agree direct consumer subsidies if you want to improve access this is the better way to do it and Lifeline gets a lot of criticism. It's not perfect but it's one of the better structured universal service plans as opposed to the high cost fund which to note one study Scott Walson, Tom Hazlett found to add the additional telephone subscriber using the high cost fund which is the universal service program for rural and high cost areas cost about $100,000 to add a single subscriber to the telephone network. I mean, that's irresponsible use of public funds and it diverts the FCC's attention to these very complex systems that they don't need to. I'll note another. I've got outside, there's a chart. Myself and an MA student went through the FCC's video regulations and a lot of these regulations have accumulated over years to favor certain parties throughout the years. Broadcasters are a major one as a distribution service, not the networks. There's a lot of baggage that comes with those and I think if you care about localism and diverse viewpoints and this sort of thing you should subsidize the programming directly and not do it through the regulatory system which please look at my chart. I mean, this is all meant to favor certain programming. Let's do it directly, let's do it transparently and honestly and to me that's the way to do it. If there's a silver lining to the net neutrality decision for me it would be hopefully we can get beyond these debates and Congress can start looking for where these deals are possible and I think there are some there especially on the direct consumer subsidy point. This is an idea by the way from Howard Shalansky who did time at the FCC, was in President Obama's OIRA office and I think it's a worthwhile thing to consider. If I can take off my moderator cap and jump on the what's the kicker question. I think how's on point on what sort of what it will take to do a deal between Republicans and Democrats to actually update the law and get out of title two. I would just note I think in addition to Lifeline putting that on a firmer ground in terms of its budget there are also strict limitations on what funds for Lifeline can be used for and expanding that to address issues around digital literacy and in addition just the cost of broadband I think would be a big improvement that there's no federal program for now and so that's one other potential sort of bargaining chip in the whole discussion. Yeah, please. Should I go to the microphone? I think yeah, I think that'd be best so we can get you for the recording. Thank you. Hi, good to see you guys. So I have two questions for Hal and then I'll follow up on something else. So the kicker you mentioned this subsidy program was on a panel with you last August, you talked about this. The FCC already did the Lifeline Modernization Order so in a sense the kicker that you're proposing that Congress do, the FCC has already sort of done that itself in some way. But botched the financing and it's too small of a program, go ahead. So well, I don't disagree with you that a larger Lifeline subsidy would be wonderful but so assuming that because the FCC has modernized Lifeline already and has addressed that issue in some ways, it would seem that you need a second kicker, a backup kicker, what would that be? Who would your bench warmer kicker be? And I guess the other question, Fred you mentioned quite a bit about, you had some compelling data and insight on edge provider power. And I know this has been a big part of the debate in the FCC's privacy rulemaking that's ongoing. A lot of what you angled towards kind of begs the question and I'm gonna ask it provocatively to put it out there and let you guys address, is are you proposing that the FCC or the FTC, whoever your regulator of choice is, should be regulating privacy at the edge, should be telling edge providers what they can and can't do, how they can and can't prioritize information and run their businesses. Because from the gist of what you laid out, one could draw that assumption. So I just wanted to throw both those out there for you. Can I go or you want me to go? Mine's probably gonna be relatively quick. Okay, go ahead. I think whomever the regulator is and whatever the principles are that people agree on should apply to all those who are similarly situated. And that in my view doesn't mean identical, but similarly situated. Here is my example. People throughout most cultures and all time generally considered murder to be wrong. Now, there is not a rule that says it's bad for men to murder people, but okay for women to do it. Murder is generally wrong. Anyone who commits murder as it's defined, there are exceptions, is guilty of murder. So my point on the privacy thing is, or the STB thing, or net neutrality, or any other principle that you like. If you really believe in a principle, then you need to find out how to protect that principle. So privacy as an example. If I don't want somebody to know something personal about me, let's say that I'm gay, but I've chosen not to come out. I don't care whether it's my ISP that outs me or Facebook that outs me. I just don't want to be outed, period. So, to sum, whatever the principle is, protect it. And the argument that, well, protecting it from 5% of the potential harms is better than a race to the bottom to me as a non-answer. It is an acceptance by society that it's okay to out people against their will as long as it's one of the 90% that does it. That's not a good answer. As a policy matter, in my view, that answer is always wrong. I'd like to add something. Go ahead. On the subject, this might be, I think the DC Circuit might have given, people do want regulation of Facebook and Google and these others a little ammo, and maybe we can talk after, but what the DC Circuit did was, it appeared to get rid of the NAIRUC test for what common carriage telecommunications is. And that test is from 1970s. Basically, courts say the Communications Act doesn't define, it defines common carriage and telecommunications in a circular way. Therefore, we have to look at the common law and how these networks function to determine their common carriers. The DC Circuit, in the decision last week, basically got rid of that test, imposes a consumer perspective test. If a consumer perceives you're a telecommunications provider, apparently for the DC Circuit, that's enough for the FCC to deem you a telecommunication provider. I mean, that certainly includes over the top VoIP apps and messaging apps and possibly some other large companies out there. So, we might be dealing with this soon. I'll just put that out there. Let me answer Phillip's first question. And I think the premise of the question was, the left has already secured all at once in terms of a subsidy. And remember, the only thing that we've achieved through this lifeline modernization is that money that previously had been earmarked for one type of subsidy, namely phone servers, could now be used for broadband. So, I haven't fixed the funding by any stretch. The funding is still tied to this dying service, these interlot of voice services, the pot of money which is disappearing, and that explains why the FCC has to keep increasing the tax rate to get the same level of tax revenues on a pot of money that's going away. It raises the raise rate. What's gonna happen very soon is there's gonna be pressure to look elsewhere by the FCC to find a new pot of revenues. And where is that pot? The pot is broadband revenues. And so what Tom Wheeler is doing, I think, is he's holding off until the election because he knows what happens if he goes first by the 2015 open internet order, if he goes first and assesses a federal fee, universal service fee on broadband revenues, that is going to end the preemption that's in the 2015 open internet order that stops, that prevents states from assessing their own state-based fees on broadband for universal service fees. The telecoms are of Vermont, by the way, is champing at the bit to go. And he can't go right now because he's being preempted. And so this is gonna turn into absolute chaos, the notion that, I mean, you think the problem's solved, the financing is broken number one and the pot is too small. I'm talking about eradicating the adoption problem. If you wanna take the number down, I've done the math, I have a blog on it, but if you really wanna take the problem down, it's not gonna come from this puny little program at the FCC that perversely is going to be taxing broadband in order to subsidize it. This solution that I'm offering would be a bonafide fix to the subsidy. So I respectfully reject the notion that the left already has what it wants. What I'm offering is secure funding from a different non-distortionary source that would be lasting in exchange for giving up a little bit on how we regulate discrimination by an ISP, not whether we're going to, but how we're going to do it. I think that's a very reasonable compromise. All right, do we have any other questions from the audience? Otherwise, I might go ahead and turn it back over to Eli for some closing remarks. Not convinced that it's working, right? All right, please join me in thanking our panelists for a fascinating live interview. Thank you.