January 14, 2010
Re: COMMENTS – in the Matter of Preserving the
Open Internet (GN Docket No.
Dear Chairman Genachowski and CommissionersCopps, McDowell, Mignon Clyburn and Baker:
The American Homeowners Grassroots Alliance (AHGA) is pleased to respond to the FCC’s request for comments on proposed rules in the Matter of Preserving the Open Internet. AHGA is a national consumer advocacy organization, focused on a very diverse array of economic issues that share a significant impact on homeowners and home ownership. The importance of an open Internet to economic opportunities and the wellbeing of homeowners and other consumers grows every day. The FCC has a critical responsibility in assuring that the Internet remains both open and neutral, and we applaud the Commission for undertaking this exercise.
In our engagement on economic issues that have spanned most U.S. business sectors we have learned several things. The impact of different issues on consumers and the economy varies greatly. The performance of regulatory agencies from one business sector to another also varies greatly. Regulations can sometimes have unintended consequences, and the risk of unintended consequences also varies with the nature of the business sector and the competence of the regulatory agency These factors should be considered in determining what level and type of regulation is appropriate in the telecommunications and all other business sectors.
The potential impact of the actions under regulatory consideration on the economy is obviously a critical factor. Our nation learned the hard way that the consequences of providing regulatory flexibility to the federal agencies responsible for monitoring mortgage lending practices was disastrous. Most economists believe that the subprime mortgage meltdown was the primary cause of the current recession, an unemployment level exceeding 10%, millions of foreclosed homeowners, and the need for nearly a trillion dollars in federal bailouts. Most of them also believe that it will take years to dig our way out of the recession. The greater the potential magnitude of injury to consumers and the economy, the greater the need for regulations that will prevent that serious injury from happening. On a scale of 1 -10 that measures the economic impact and the challenges of remediation, the financial services sector meltdown scores a 10.
At the other end of the scale is the regulation of economic activities whose potential impact on the overall economy is of a lesser magnitude. As important as an open Internet is to society, a temporary misjudgment in the form of an inadequate provision in these regulations is unlikely to cause anything approaching the disastrous economic consequences that resulted from the subprime mortgage crisis. This is not to suggest that the FCC should not do its best to get these regulations right the first time. With the many strident voices raised on this issue, it bears remembering that these regulations can and should be subsequently modified if circumstances merit.
A second important consideration in developing regulations is the track record of the oversight agencies and/or commissions responsible for administering those regulations. AHGA believes that past is prologue in regulatory enforcement. Agencies that haven’t enforced existing regulations, or effectively utilized the regulatory flexibility that was previously provided them, will be unlikely to do so in the future, while those that have demonstrated the ability to do so can generally be counted on to continue to do so in the future. Those agency’s effectiveness or deficiencies should be taken into account in the structuring of future proposed regulations.
During AHGA’s efforts around the subprime mortgage crisis we learned that multiple federal agencies had totally abdicated their regulatory responsibilities. In some cases they simply failed to enforce simple and straightforward regulations. In cases where the regulations allowed the agencies flexibility to interpret and enforce them as appropriate, there was often no effort to either interpret or apply them to risks that were obvious and growing. By contrast the FCC has done an outstanding job of enforcing the four current network neutrality principles in the original land line environment they were created for. Today there is network neutrality in that environment, and the commissioners and staff of the FCC deserve the thanks of American consumers for their good work.
A third factor is the risk of unintended consequences, which is always present but varies from one sector to another. In mature business sectors, such as the financial services sector, there is relatively less likelihood that completely new viable business models will evolve compared to other sectors (the ones that caused the subprime mortgage crisis were an exception, but history proves they weren’t viable). Regulations intended to prevent a recurrence of the subprime mortgage crisis are unlikely to preclude the introduction of new financial services business models that could benefit consumers. As a result additional regulation of this sector is also less likely to dampen private investment decisions in new business models in that sector.
The opposite is the case in the information and communications technology sector, where technology is evolving rapidly, and very large private sector investments are often required to develop and/or implement new technologies. An inflexible regulation could have little or no benefit for consumers while substantially undermining private investment in that area. It is difficult for regulators to anticipate in advance technologies that have not yet been invented, and incorporate appropriate regulation of them into contemplated regulations. Because the technology evolves so rapidly, rigid regulations also have a much greater risk of preventing the timely flow of beneficial new technologies to consumers. The costs of contemplated new regulations can also discourage the large private investments required to develop and implement new technologies, so any new regulations that impose new costs must also provide commensurate benefits. Most of those additional costs are passed on to consumers, and if this is not possible, service providers may conclude that it is not profitable to provide the service.
Because of the dynamic nature of the ICT sector, its focus continues to shift and morph. We are rapidly shifting to a world in which mobile computing is a more important part of the environment, and voluntary business agreements are a significant element of the ICT environment. The FTC’s four network neutrality principles date back to the era of landline access. It is appropriate that they be reviewed, updated, and modified as necessary to assure that mobile computing is treated in a manner consistent with those principles, and that voluntary business agreements continue to be monitored to prevent unjust or unreasonable discrimination. Ways to improve consumers’ ability to better compare the performance of alternative service providers should also be developed. In modifying or expanding the scope of network neutrality principles, the regulatory flexibility that the FCC has consistently exhibited and rightfully earned should be retained at all times in future regulations.
There is one area where Internet network neutrality is being challenged that is not the subject of this request for comments. Unfortunately this inquiry focuses only on providers of broadband Internet access service. There are other businesses that provide Internet networks, and some of them are openly attempting to thwart competition and undermine market forces. This can have a serious adverse economic impact on American homeowners. These ongoing efforts to undermine network neutrality can cost consumers many thousands of dollars.
The nation’s national online network of homes for sale has faced repeated efforts to deny home sellers the services of discount real estate brokers who provide sales assistance at a fraction of the typical 5-6% real estate commission. Currently about 90% of home buyers search for homes on that consumer-facing online network, so it’s imperative for home sellers to get exposure on that network. If they are denied access to that network because they prefer to use a discount real estate broker, an owner of a $200,000 home might be forced to pay a $10,000 – $12,000 real estate commission instead of a few hundred dollars a discount broker would charge.
The Federal Trade Commission has taken the lead on addressing this challenge and has initiated efforts to stop the efforts of numerous local Multiple Listing Services (MLSs) across the country who have sought to limit home sellers access to their networks through discount brokerage services. The FTC has been successful in the ongoing series of cases, although one MLS is now appealing the initial FTC finding against it.
AHGA believes that this is a serious problem that could spread to other private networks. What if dominant online auction firms started selling products and discriminating against customers who were also competitors? What if dominant sellers of online advertising did the same thing? Federal competition laws or regulations must be strengthened in order to more effectively discourage dominant private Internet commerce networks and search firms from engaging in such actions. AHGA urges the FTC and the FCC to support such changes.
In summary, the promulgation of all new regulations should take into account the seriousness of any threats faced by consumers, each agencies enforcement track record, and the relative risks of unintended consequences in that sector. There is a great need for much stronger regulation of the financial services sector, and AHGA and other consumer organizations are seeking very specific laws and regulations that strengthen the regulation of this sector, and to assure that agencies responsible for oversight of financial services may no longer evade their regulatory responsibilities. AHGA also believes that new laws and/or regulations are necessary to provide commissions such as the FCC, FTC, and/or DoJ the tools they need to stop the persistent efforts of MLSs to prevent competition on their consumer-facing Internet networks and undermine network neutrality. The practice can cost consumers thousands of dollars, and could easily spread to online auction services, advertisers or to other areas if stronger enforcement tools are not created.
With respect to the FCC’s ongoing efforts to preserve an open Internet, it has done an excellent job of balancing all interests and preserving the open Internet that consumers continue to enjoy. There is no reason to doubt that the FCC will continue to exercise good judgment if the current regime of regulatory flexibility is reaffirmed, and applied to new areas and issues in the dynamic and fast changing ICT sector. The kinds of new prescriptive regulations that are needed, and which AHGA is seeking in the financial services sector, are therefore neither necessary nor desirable to preserve an open Internet given the FCC’s commendable track record. In the development of these important regulations to preserve our open Internet we therefore urge Commissioners to continue to provide the FCC’s staff both the broad goals and the flexibility they need to extend their balanced and successful track record into the future.
Bruce N. Hahn
C: The Honorable Timothy F. Geithner