RUDOLPH J.R. PERITZ, New York Law School
Email: rperitz@nyls.edu

This paper is an edited and lightly footnoted version of Remarks made at a session convened during the American Antitrust Institute’s most recent annual conference. The session was entitled “Can FTC Section 5 and E.U. Article 82 Converge?� The paper distinguishes between the “domestic question� of whether FTC Section 5 should be interpreted to go beyond Sherman Act Section 2, and the “cosmopolitan question� of whether convergence with Article 82 is desirable and achievable. The paper focuses on the domestic question; to the extent an expansive use of Section 5 would foster convergence, that would be a side benefit. The paper asserts three propositions: First, there is a strong and undisputed historical basis for the view that the FTCA is something different in kind from both the Sherman and Clayton Acts. Second, in this light, the FTC’s institutional character is properly understood as a competition commission to investigate, report, advise against, and if necessary stop practices deemed unfair methods of competition, ex ante, in their incipiency. The FTC is not an antitrust enforcement agency like the DOJ Antitrust Division. Third, federal court decisions beginning in the 1960s unanimously support the view that the FTC Section 5 and its enforcement by the Commission legitimately serve competition policy understood more broadly than antitrust law, i.e., than the Sherman Act. In sum, the FTC has a long-standing Congressional mandate and judicial invitation to be bold, to push past the antitrust laws, to investigate and stop in their incipiency “unfair methods of competition.� The Commission should be an innovator and investigator rather than an enforcer; it should spend significant resources working at the cutting edge of economic theory and legal doctrine. The FTC mission, properly understood, is to engage in research and development of competition policy at the forefront of changing commercial circumstances.

LILI LEVI, University of Miami - School of Law
Email: llevi@law.miami.edu

This Article addresses both the constitutionality and the efficacy of the FCC’s current rules that require broadcasters to air children’s educational programming. It argues that, even though the rules would probably pass muster under the First Amendment, they should nevertheless be substantially revised. Empirical studies show mixed results, with substantial amounts of educationally insufficient programming. This is predictable - attributable to broadcaster incentives, limits on the FCC’s enforcement capacities, and audience factors. Instead, the Article advises a turn away from programming mandates. It proposes a 'pay or play' approach that allows broadcasters to pay a fee to a fund for high-quality public television children’s programming, or to air such programming themselves, or to choose a combination of the two. The Article details some specific suggestions designed to limit both broadcaster game-playing and FCC content-intrusiveness under such a scheme. Ultimately, however, it calls for a ventilation of 'pay or play' models in a public rulemaking proceeding. Such an inquiry might well result in a negotiated compromise. In time, its efficacy could be assessed by comparing the resulting programming to what was aired under the more traditional regulatory approach of the past decade.

STEPHANE ROUSSEAU, Université de Montréal - Faculty of Law
Email: stephane.rousseau@umontreal.ca

The credit crisis that started in the American mortgage subprime market in 2007 is having profound social and economic consequences. In this context, lawmakers, regulators, and commentators have questioned the role of rating agencies in the market turmoil. In light of the critiques, a strong consensus emerged that regulatory intervention was needed. The consensus was encapsulated in the Group of Twenty (G20) communiqué of April 2009 that stated that 'We have agreed on more effective oversight of the activities of Credit Rating Agencies, as they are essential market participants.' Thus, a number of reform initiatives are under way in Canada, Europe and the United States to address the concerns raised by credit rating agencies’ activities in the context of structured finance products.

The paper provides a critical assessment of the regulatory initiatives put forward on both sides of the Atlantic to address the problems which have affected the accuracy of the ratings as well as the integrity of the ratings process. The first part of the paper offers some background relating to the subprime credit crisis. The second part moves to an analysis of the role of CRAs in the context of the structured finance products. Finally, after having highlighted the failings of CRAs’ in the asset-backed securities market, the paper presents the reform initiatives. It offers a critical comparative examination of the strategies for enhancing the accountability and effectiveness of CRAs.

GEORGE S. FORD, Phoenix Center for Advanced Legal & Economic Public Policy Studies
Email: george.ford@phoenix-center.org
LAWRENCE J. SPIWAK, Phoenix Center for Advanced Legal & Economic Public Policy Studies
Email: lspiwak@phoenix-center.org

In 1999, the Federal Communications Commission (“FCC�) began to grant incumbent local exchange carriers (“LECs�) pricing flexibility on special access services in some Metropolitan Statistical Areas (“MSAs�) when specific evidence of competitive alternatives is present. The propriety of that deregulatory move by the FCC has been criticized by the purchasers of such services ever since. Proponents of special access price regulation rely on three central arguments to support a retreat to strict price regulation: (1) the market(s) for special access and similar services is unduly concentrated; (2) rates of return on special access services, computed using FCC ARMIS data, are very high; and (3) prices for special access services are lower in more heavily regulated markets than in markets with the most pricing flexibility. As shown in this Policy Paper, these arguments, even if factually correct (which they are not), do not prove the presence of undue market power and, therefore, the need for additional price regulation. Moreover, those lines of inquiry do not consider the potential costs or risks of regulatory intervention, which must be part of any serious cost/benefit analysis. That said, given the importance of this issue, we provide several recommendations for policymakers that are evaluating the special access regulatory paradigm. First and foremost, data collection must be improved. Second, any revision to the special access price regulation paradigm must be subject to a stringent cost/benefit test, with explicit consideration of the costs of regulation. Finally, when gathering and analyzing more comprehensive data, policymakers should distinguish between economic definitions of “geographic market� and geographic areas for proper and efficient administration of its special access rules.

T. RANDOLPH BEARD, Auburn University - Department of Economics
Email: RBEARD@BUSINESS.AUBURN.EDU
GEORGE S. FORD, Phoenix Center for Advanced Legal & Economic Public Policy Studies
Email: george.ford@phoenix-center.org
LAWRENCE J. SPIWAK, Phoenix Center for Advanced Legal & Economic Public Policy Studies
Email: lspiwak@phoenix-center.org

Countries around the world are increasingly concerned as to whether the adoption of broadband technology by their respective citizens is sufficient to support economic growth and social development. Unfortunately, such concerns are often expressed in terms of where a country ranks among its peers by means of raw adoption numbers. Such raw data are often misleading and incomplete. In this Paper, we propose a different and more policy-relevant approach to adoption measurement. We develop a value-based Broadband Adoption Index (“BAI�) that compares the actual value to society that results from the adoption of broadband technology to a target level of adoption value. This target level will vary from country to country and is a function of the social value of broadband connectivity, measured as the difference in the social benefits and the costs of broadband. The BAI is specifically designed to accommodate and include the value of different connection modalities like mobile broadband into a single index, something that merely summing the number of connections cannot do. We believe that policymakers can adopt aspects of the BAI approach immediately, with particular attention to collecting and using proper information for policy decisions.