The Ambulance, the Squad Car, and the Internet
70 Pages Posted: 28 Feb 2006
The Federal Communications Commission moved swiftly in 2005 to impose E911 and CALEA requirements - two "social policies" that had been applied to telephone companies - on broadband internet access providers and online applications. E911, broadly speaking, requires telephone companies to provide location information to a dedicated call center for anyone calling 911; CALEA, in general, requires telephone companies to design their services so as to be easily tappable by law enforcement. In the E911 context, dominant vendors of outsourced E911 compliance services have caused the FCC to insist that online businesses find ways to make their services work with 30-year-old legacy emergency hardware (access to which is controlled by the vendors). In the CALEA context, law enforcement has persuaded the Commission to rely on extraordinarily weak legal arguments in insisting that online businesses and broadband access providers make their services acceptable to law enforcement - either before these services are launched, thus constraining innovation, or for existing services at great retrofitting expense. In both settings, the FCC has plunged quickly ahead to apply these policies to the internet with little consideration either for the economic impacts of its choices or for alternative strategies that might have been employed. And both policies have been lifted largely unchanged from what they had been in the world of telephony, even though the internet presents a very different technical and economic context.
These proceedings, taken together, provide a case study in a new form of digital era regulatory capture. Where an independent agency believes it has a broad delegation of power over new technology from Congress, and has a political agenda and the technical assistance of dominant unregulated entities intent on retaining the advantages that the old technology gave them - in this case, assistance came from providers of outsourced compliance services to telephone companies, and from the Department of Justice, a powerful sister agency - incumbents can easily use regulation to raise the costs of entry for new competitors. Unlike the usual tale of regulatory capture, the work of FCC staff on these rulemakings was not necessarily corrupt, and can be explained in part by the cultural background of staff (their traditional telephony or "bellhead" orientation). But the interplay among the key players in this new form of capture has resulted in a toxic environment for new online businesses established to compete with traditional telecommunications providers: The combination of hard social questions, the ever-present threat of terrorism, captured but well-meaning staff, law enforcement heavy-handedness, dominant vendors of compliance services, and well-funded activities of rent-seeking incumbents has resulted in substantial barriers to entry being created for a significant portion of the American economy by an unaccountable independent agency.
Keywords: Administrative law, capture, telecommunications, cyber law, VOIP
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