A decade of innovation: highlights from the American Enterprise Institute's 'Digital Crossroads' event

Digital Crossroads, originally published in 2004, was a tour de force of telecommunications and Internet policy. Co-authored by Jonathan Neuchterlein (who recently joined the Federal Trade Commission as General Counsel) and Phil Weiser (Dean of the University of Colorado Law school and a former Obama administration official), the book is a comprehensive look at communications technology policy by two prominent, respected thinkers in the field.

AEI scholar Jeff Eisenach moderated a recent discussion with the two authors, providing an opportunity for them to speak about the latest edition of their book, and how the industry has changed since 2004. I took copious notes, and a link to the video of the discussion is at the end of this post. Below are some long quotes from the authors that lay out several issues that policymakers will be thinking about over the next several years.

Innovation: From Circuit-Switching Facilities to the Broadband Ecosystem

The rapid pace of technological change is something we frequently point to as evidence of the industry’s continuing evolution. This point also came through clearly as Jon and Phil spoke about the laborious process of writing the original edition. As Jon put it:

“ . . . The whole first 150-200 pages of the book were devoted to these esoteric battles about whether AT&T Corp and MCI would be able to get access to Bell Company facilities to provide local circuit switched telephony services. And that seemed like a cutting edge issue at the time. And during the course of working on the book . . . it became really clear over time that the future of the industry didn’t lie in the circuit-switched technologies that were the focus of the ’96 act. The future of the industry lay in the broadband ecosystem.”

(Notably, spectrum issues got very little notice in their original book because mobile technologies were just beginning to become widely used at the time).

Phil chimed in with additional thoughts about the way technology was changing a decade ago:

“We timed the first edition reasonably well. Had we written it a few years earlier, we probably wouldn’t have gotten to the point Jon just mentioned, of recognizing that the ’96 act and all that it focused on was going to become obsolete. That also leads us to recognize it’s unfortunate the way the Congress passed the major telecom reform law when it did because it focused on circuit-switched technology and the local long-distance distinction. That base doesn’t exist anymore . . . ”

Interconnection: Compare 20 Years Without Regulation vs. Inter-Carrier Compensation Rules

Jon mentioned another issue that has changed a great deal since the original book was released in 2004: interconnection. I’ve written about interconnection in the modern communications industry here, here and here, and Jon’s thoughts were not dissimilar to my own:

“Another set of issues that we address in the new book that people really hadn’t focused on much at all is the emerging world of interconnection disputes in the Internet space and the relationship of that set of disputes to the traditional inter-carrier compensation issues that the FCC has addressed. This is sort of a brave new world. It’s increasingly coming to the fore. The FCC confronts the transition – the ubiquitous transition from circuit-switched technologies to IP technologies. Over the long term, everything will be IP, all interconnection will be IP. And the question is what do you do about a legacy regulatory framework for interconnection policy in a world where everything is based on a protocol that historically has been free of interconnection obligations enforced by the government?”

Jon added: 

“And [Phil] and I may disagree slightly about this. My view is that over the last 20 years, the market has shown that it’s more or less capable of producing highly efficient outcomes for interconnection among large ISPs and backbone providers.  There have been some peering impasses that have led to momentary denials of full Internet interconnectivity, but they have tended to be brief. And as Jeff pointed out, I would be hesitant before creating a regulatory regime that tells the parties who are negotiating these peering arrangements that the federal government exists as an arbitrator in the event they can’t reach a negotiated solution because the very presence of the government in the background has – could have the effects of distorting the negotiations and producing less efficient outcomes.”

Internet Governance: A Multi-Stakeholder Model Facilitates Cooperation

Phil pointed specifically to the role of multi-stakeholder organizations in helping address issues that might come up in interconnection matters. Silicon Flatirons, which Phil directs, recently came out with a good report [PDF] that discusses how to ensure the effectiveness of multi-stakeholder organizations, and describing the important role they play in the Internet ecosystem.  Phil notes that government can help empower such efforts by recognizing them and relying on them in particular:

“ . . . there has been a move towards some transparency on peering policies. And there may need to be some more transparency on interconnection as to voice communications, which will happen more and more in the IP world and will need to be more cooperation on the session initiation protocol, SIP, which will increasingly replace the traditional SS7 standard that came out of the Bell system world.  What’s, again, going to help facilitate that cooperation, my aspiration – we talked about this a little bit in the book, is multi-stakeholder processes that will help facilitate cooperation. And government has a role in empowering such processes.”

Jon, on the proven ability of markets to resolve interconnection disputes:

“I mean, the good news is that the disputes don’t arise very often and there’re all sorts of market mechanisms that keep them, either from happening or from becoming particularly significant. So for example, a lot of IT professionals now understand the utility of being ‘multi-homed.’ In industry parlance, that means that they pick multiple ISPs. They have one in reserve in the case that their primary ISP is engaging a peering dispute that would otherwise cut that business off from the rest of the Internet. And so these sorts of market responses have been extremely effective to date and keeping the Internet whole. So my hope is that these topics remain of purely academic interest.”

The FCC as Internet Regulator, and the Tension Between U.S. Domestic and International Policy

Jeff then turned to the FCC and its role in regulating Internet and communications technologies, asking the authors whether they believed Congress needs to re-define the FCC’s authority over broadband and reform the Communications Act.

Phil believes congressional action is inevitable, but cautions legislators against focusing too much on specific technologies:

“I don’t think either the FCC or the courts will sort out this jurisdiction. When and how Congress gets around to doing that is anyone’s guess. And the challenge for Congress in a round two is to not do what it did in the Communications Act re-haul in 1996, which is to be very prescriptive, focusing on particular technologies.

Jon took this point in another direction. He mentioned the debate in the ITU late last year on the role of that body in regulating the Internet, and noted that the way the role U. S. regulators assume domestically regarding Internet regulation has consequences internationally:

“…there’s an effort by a variety of foreign countries to subject Internet peering and transit arrangements to the oversight of the ITU, which is an agency of the United Nations. What I can tell you about the ITU is that no one seems to want to be – no one in America seems to want to be subject to its jurisdiction. And there was a sort of an interesting interplay between the U.S. opposition to that initiative, on the one hand, and the FCC’s emerging inquiry into whether there should be regulatory oversight of IP to IP interconnection.  On the one hand, you have the FCC expressing concern that an entirely unregulated interconnection space was unstable and opening a proceeding to investigate those issues. At the same time, the State Department and others in the U.S. government were encouraging to the world to recognize the need for an unregulated Internet space that is subject to governance only by multi-stakeholder bodies.  And this is a tension in U.S. policy that will continue to play out over the coming years.”

The authors also covered many other issues, including Universal Service reform and spectrum incentive auctions. It was a refreshingly candid and thoughtful discussion by two of the leading policy thinkers on Internet and communications policy matters and I congratulate Jeff Eisenach in convening the session. For anybody who would like to hear the conversation, both video and audio versions of the event are available on the AEI website.