Consumers drive change in communications market

Consumers drive change in communications market
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Change is all around us, including the ways in which we communicate.

A new Internet Innovation Alliance study by Dr. Anna-Maria Kovacs focuses on a transformed communications marketplace where, given many choices, consumers are in charge. She convincingly shows that, to continue the provision of core consumer values, regulatory approaches must also be transformed.

Today’s communications regulations were crafted when decision-makers had power over a monopoly telephone provider. Regulators could easily enforce consumer protections through service requirements on the monopoly they regulated. This system worked well. It was a product of its time, but now it’s a historic relic. 

Consumers now switch rapidly among a large array of communications services and applications. Some are regulated. Many are either lightly regulated or not regulated at all. 

With the cascading movement of consumers to Internet-based communications, regulators face far more difficulty in assuring the continued provision of the core consumer values of access to public safety and disability services, competition, consumer protection in dealings with the service provider, and universal connectivity. Regulators simply don’t have purview over platforms like Facebook, Skype, Twitter, Snapchat, email and messaging.

Given these dramatically changed circumstances, in determining the best way to address core consumer values, Kovacs promotes a “new network compact” that acknowledges today’s more complex relationships among consumers, regulators and service providers. 

As she writes, “the old network compact … was primarily between regulators and service providers. Network providers supplied what regulators decreed given their vision of consumer welfare. Consumers had no choice but to buy those services or do without. Today, thanks to the ample choices they enjoy, consumers have taken control. They are no longer passive beneficiaries of decisions made by others — they are making their own decisions for their own benefit.”

Recognizing that consumers are now in charge, a new network compact should feature empowered consumers in a dynamic relationship with competitive providers. Regulators should seek a more strategic relationship with service providers that focuses on the core consumer values yet remains responsive to consumer behavior. In this new world, regulators should strive to be persuaders of all participants in the ecosystem rather than commanders of providers.

But what does a “new network compact” actually mean? What would applying this regulatory model in today’s world look like in practice? Let’s consider two examples.

First, let’s focus on one new way to encourage universal connectivity. The FCC’s Lifeline program was designed in the mid-1980s to provide low-income consumers with affordable wired telephone service. Subsequently extended to wireless voice service, the program has played a key role in promoting universal connectivity.

But, in the Internet communications age, a subsidy to phone companies that discounts the cost of service has lost much of its utility for consumers. It’s a vestige of the old assumption that regulating telephone service was sufficient to assure core consumer values.

Under a new network compact, the Lifeline subsidy could be modernized to provide the discount directly to the consumer who then, exercising her control, could decide whether to apply it to a broadband or telephone service.

In recent years, legislation has been introduced to extend the Lifeline program to broadband. Fundamentally altering the approach of the program to make it consumer directed is the most efficient way to achieve that goal. It’s also the best way to enable consumers to make the most of the subsidy.

That change should be accompanied by other Lifeline program reforms, including the transfer of consumer eligibility verification from service providers to a government agency, similar to other means-tested programs like food stamps or Medicaid. 

Second, we should consider a new network compact approach to promote the core consumer value of competition. Rather than continuing the old approach of requiring wholesale access to existing networks for competitors, imagine a new approach that offers incentives for new competitors to build their own networks. The result is new competition and an overall increase in broadband capacity.

Kansas City, Mo., provides a recent example where local authorities offered regulatory incentives to encourage Google to build a custom fiber-optic network. The incentives worked: Google built the needed infrastructure and provides residents with an attractive, competitive alternative. Moreover, that investment stimulated existing service providers to upgrade their networks in Kansas City, Austin and other locations. The results: new modern high-speed networks, greater broadband competition and corresponding benefits for consumers. In the new network compact, applying incentives in addition to or in lieu of regulation can achieve positive social outcomes.

So the communications revolution not only represents a shift in how and how fast we communicate, but also signals the need for a shift in regulation itself. The question now is how regulators can best keep up with marketplace changes — and whether they should move quickly toward a new model that acknowledges the virtues of today’s competitive marketplace and the control consumers now exercise. The answer seems perfectly clear.

Boucher served in the House from 1983 to 2011, where he co-founded the Congressional Internet Caucus and chaired the Energy and Commerce Committee’s Subcommittee on Communications, Technology and the Internet. Today he is honorary chairman of the Internet Innovation Alliance and heads the government strategies practice at the law firm Sidley Austin, which represents communications companies, among other clients.