When I worked at the FCC, I kept a running list of phrases bandied about by lobbyists. Sometimes, these phrases entered the common parlance of the Commission without really being questioned. Without being explicitly dishonest, I found these terms tended to distort the policy dialogue, and even permit regulatory capture. Here are some selections from my Lobbyist-to-English Phrasebook:
Mobile TV – Translation: keep the status quo in the TV bands, which is probably the most inefficiently used public resource. Any television with a battery is inherently mobile. These things were all the rage when I was a kid in the 1970s. People took them to ball games so that they could watch the instant replay from the stands. If history is a guide, video programming will become one service running over multi-service, IP-based networks.
Spectrum Glut – Translation: keep the entry barriers for wireless networks high. A spectrum glut is simply not possible. Think about this carefully. The contrapositive of a spectrum glut is that there is not enough harmful interference. You cannot be too rich, too good looking, or have too much spectrum. An indication of effective radio policy is that revenues from spectrum auctions would be at or near zero marginal cost.FN What the term is really arguing is that if spectrum resources are freely available to all wouldbe network operators, then there would be too many new entrants. The flood of new entrants would cause compétition sauvage that all operators would go out of business, harming consumer welfare. If the business process is not patentable, then it probably does not make sense to extend de facto intellectual property protections to it. The FCC is not the PTO.
The US is a broadband leader – Translation: Some cherry-picked statistic to show that US is not lagging at broadband Internet adoption. We beat Korea in broadband!! Okay, okay, it’s North Korea, but they’re part of the Next Generation Access of Evil!
Encourage investment – Translation: corporate welfare. Promoting investment in network is not an objective of communications policy. The US tried this. It was called rate of return regulation and it was a failure. What is an acceptable objective is promoting innovative services at marginal cost. Investment might be a necessary element to that, but it is not the objective.
Insight: As an MBA, I find this last one particularly disturbing. A firm invests when the investment is reasonably expected to generate a super-normal rate of return. Otherwise, management should return the capital to shareholders in the form of a dividend and let the shareholders invest that cash somewhere else. Anything else is a breach of their fiduciary duty.
I recently discovered, that the US does not hold a monopoly on this problem. Recently, ECTA (the European competitive carriers’ association) released a statement arguing that Telefonica in Spain and Deutsche Telekom were threatening their national regulators that they would not invest in their networks unless certain policy restrictions were relaxed.
Implicit in this investment-for-certain-policies argument is that certain policies might increase the amount of capital required for network investment or lower the cashflows associated with the investment, lowering the rate of return to an unprofitable level. This is a fair argument. However, in order to properly evaluate that argument, the carrier has to provide regulator with its financial model for its network investment decisions, including all assumptions. Otherwise, this argument should be rejected out of hand for being unsubstantiated. It is foolish for the regulator to assume that its actions have no consequences on the profitability of the firms it regulates. However, it must examine the trade-offs inherent in its actions to obtain the best possible outcome.
In the final analysis, there are better vehicles for stimulating investment in networks such as intellectual property rights, tax policy, grants, loan guarantees, and industrial policy. In most cases, the telecoms regulator has no authority to pursue these policies.
