Subject: [NEXTEL-1] FCC Commissioner Abernathy on BPL at United Power Line Conference

From: [email-masked]
Date: Wed, 24 Sep 2003 16:51:00 -0400

Reaching Broadband Nirvana

United PowerLine Council UPC)
Annual Conference

Remarks of FCC Commissioner
 Kathleen Q. Abernathy

September 22, 2003

Thank you very much for inviting me to speak with you.  I am very excited about
broadband-over-powerline technology.  I have seen it in action, and I believe it
has a very bright future.  It is a real honor to be your keynote speaker at this
important juncture for BPL.

As a regulator, I am keenly interested in BPL technology for a number of reasons. 
One of my central objectives as an FCC commissioner is to facilitate the
deployment of broadband services to all Americans.  I also fundamentally believe
that the FCC can best promote consumer welfare by relying on market forces, rather
than heavy-handed regulation.  The development of BPL networks will serve both of
these key goals.  It will not only bring broadband to previously unserved
communities, but the introduction of a new broadband pipeline into the home will
foster the kind of competitive marketplace that will eventually enable the
Commission to let go of the regulatory reins.  I want consumers to have a choice
of multiple, facilities-based providers, including not only cable and DSL, but
also powerline, wireless, and satellite services.  Such a robustly competitive and
diversified marketplace is something I would call broadband Nirvana.  We will not
get there overnight, but the continuing development of BPL technology is a major
step forward.

While the long-term objective is a robustly competitive marketplace that is free
of regulatory distortions, a more immediate question is:  What should the FCC do
to help foster such an environment?  Sticking with my Nirvana metaphor, I guess
the question would be, what is the path to enlightenment?

 I believe the answer, in short, is regulatory restraint.  It is tempting for
regulators to take every new technology or service that comes along and apply the
same rules that govern incumbent services.  After all, regulatory parity and a
level playing field are intuitively appealing concepts.  But I believe that it
would be a huge mistake to carry forward legacy regulations whenever new
technology platforms are established.  Many of our regulations are premised on the
absence of competition, and when that rationale is eroded, we must not reflexively
hold on to regulations that no longer serve their intended purpose.  In fact, many
of our old rules not only become unnecessary as markets evolve, but they can be
fatal to new services that need room to breathe.

The Nascent Services Doctrine

This policy of restraint is something I have described as the Nascent Services
Doctrine.  By avoiding the imposition of anachronistic regulations, regulators can
best allow new technologies and services to flourish.  Once facilities-based
competition has taken root, regulators can begin to dismantle legacy regulatory
regimes, rather than extend those regimes to include the new platforms.  This is
not a matter of picking winners and losers; it is about creating an environment
conducive to investment in new infrastructure, because new platform providers
create competition and innovation that ultimately benefits consumers far more than
prescriptive regulation.  In essence, short-term regulatory disparities are
tolerated to generate long-term facilities-based competition.

Incubating new technologies and platforms helps establish new facilities-based
competitors, and the increased competition ultimately delivers to consumers the
benefits of lower prices, better service quality, more innovation, and more
choice.  Regulatory restraint is a necessary part of fostering such competition,
because there is little doubt that overregulation can do substantial damage to
nascent technologies and platforms.  As the recent turbulence in the capital
markets has shown, companies take enormous risks when they invest heavily in
communications networks — such as the broadband networks being built today.  To
avoid creating additional disincentives to invest — beyond those risks that are
inherent in the marketplace — we must resist the reflexive tendency to apply
legacy regulations to new platforms.

As I will discuss in a moment, regulatory parity is an important long-term goal,
because applying different regulations to providers in a single market inevitably
causes marketplace distortions and leads to inefficient investment.  As a
short-term policy, however, accepting some degree of disparity is not only
tolerable, it is essential.  For example, when the DBS platform was created, it
was appropriately exempt from most of the legacy regulations imposed on cable
operators.  This regulatory restraint allowed those nascent platforms to develop
into effective competitors.  Today, as electric utilities, wireless carriers, and
satellite operators strive to bring new broadband platforms to market, it will be
equally important to avoid stifling those nascent platforms with the heavy-handed
broadband regulations associated with the wireline telecom platform.  Just as you
would not build a tree house in a sapling ? because you might kill the tree and
hurt yourself in the fall ? it does not make sense for regulators to immediately
and reflexively burden new providers with a full regulatory load.  If the ultimate
goal is to develop sustainable facilities-based competition ? and I think it is ?
it seems reasonable to me to allow the new service to develop free of most legacy
regulatory burdens. 

There are two distinct applications of this doctrine.  First, it applies to
nascent technologies, which appear in the market without any clear sense of the
services they will ultimately support or the markets in which they will ultimately
compete.  And second, it applies to nascent platforms, which I think of as new
competitors to incumbents in already-defined markets.  Ultra-wideband is an
example of a nascent technology.  We do not know precisely how this technology
will be used, but we do know that it has tremendous potential and we should
approach it in a restrained manner.  Broadband over powerline is the
quintessential example of a nascent platform.  There is little question that BPL
services will compete with more-established cable modem and DSL services ? and in
some markets, satellite and fixed wireless services.

The FCC has a pretty good track record of adhering to these principles.  When
wireless voice services were first developed, the Commission refrained from
imposing common carrier price and service-quality regulations, despite many calls
to do so in order to establish parity with wireline regulation.  Similarly, the
Commission generally took a hands-off approach to DBS services as they emerged as
competitors to cable in the MVPD market.

I am especially pleased that, when the FCC adopted its Notice of Inquiry on BPL
systems in April, we rejected proposals to seek comment on the application of
legacy regulatory requirements to this platform.  For example, some argued that
the Commission should consider issues such as nondiscriminatory access for
unaffiliated ISPs, and other regulatory requirements imposed on common carriers. 
I opposed such efforts because it is premature even to consider such regulatory
intervention.  We do not know at this point how BPL systems will evolve or,
candidly, the extent to which BPL services will succeed in the marketplace.  The
flow of capital at this formative stage is critical.  If the Commission signaled
that it was heading down a path toward extension of our legacy rules, that would
have a chilling effect on investment.  Therefore, raising the specter of
heavy-handed regulation ? that is, ignoring the central premise of the Nascent
Services Doctrine ? would threaten to undermine our core goals of fostering
facilities-based competition and broadband deployment.

Of course, the interest in nurturing nascent platforms cannot justify preserving
regulatory disparities forever.  While my Nascent Services Doctrine calls for
tolerating short-term disparities, it also recognizes that the benefit of such
disparities is that they provide the impetus to reconsider the appropriateness of
our regulation of incumbent providers.  If we succeed in spurring investment in
new platforms — and robust facilities-based competition takes hold — we can then
begin to dismantle regulations imposed on incumbent providers and replace them
with more appropriate rules.  In this way the Nascent Services Doctrine provides a
laboratory to assess the necessity of our regulatory intervention on the incumbent
provider when compared with its nascent competitor.  In contrast, if we were to
extend legacy regulations immediately in a reflexive drive toward symmetry, that
would assume the ongoing need for the underlying regulation and never allow us to
assess deregulation in the real world.  Indeed, reflexive symmetry actually
institutionalizes the legacy regulation by imposing it on more providers across
all platforms, ultimately making it all the more difficult to remove regulations
from the books ? even after they have outlived their usefulness.  The Nascent
Services Doctrine places the burden on the regulator to re-institutionalize the
regulations after a new competitor has established itself in the marketplace.

We are seeing this process unfold right now as we review the rules applied to
wireline broadband services offered by incumbent LECs.  The emergence of cable
operators as the leading providers of mass market broadband services makes clear
that applying more stringent regulations to wireline providers at a minimum must
be reconsidered.  As other platforms, including BPL and wireless, become more
widely available, that will further undermine the justification for regulating
incumbent LECs’ broadband services as if they were the only available offerings. 
When the Commission completes this rulemaking, I expect that we will eliminate
many existing rules and substantially modify others; the central question is the
degree of regulation that will remain during the transition to a more robustly
competitive market.

Finally, it is important to recognize that although the emergence of new platforms
like BPL will eliminate the need for many competition-related regulations, other
types of regulation may well remain necessary.  For example, the FCC must
implement public policy goals unrelated to competition, or even at odds with
competition.  Universal service and access for persons with disabilities are
examples of this kind of regulation.  These public policy goals generally should
be applied to all service providers, to the extent permitted by the Communications
Act.  The FCC also must intervene to prevent competitors from imposing
externalities on one another and to protect consumers where market failures are
identified.  Although, as I have noted, the Commission was right to refrain from
imposing heavy-handed price and service-quality regulations on PCS services when
the were introduced, it was also right to adopt strict interference rules to
prevent competitors from externalizing their costs.  The same principle will apply
to BPL.  They key point is that, while some degree of regulation is both
inevitable and desirable, we should ensure that it is narrowly tailored to the
particular governmental interests at stake.

I appreciate the opportunity to share these thoughts with you, and I would be
happy to answer a few questions if we have time.

http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-239079A1.doc

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