Question: If you handed in a story about the current Internet, wireless and broadband markets, using primary information from 1997, would your editor fire you?  
 

I just opened the FCC?s recent net neutrality proceeding titled ?Commission Seeks Public Input on Draft Rules to Preserve the Free and Open Internet.? This proceeding is going to determine the final rules for ?net neutrality.? Whether you care or don?t care about net neutrality, you may find it odd that on page 78, there is a market analysis of small wireless competitors and it is from the year 1997. 

 

Or go to page 75 and see that the data on ?Internet Service Providers? are from 2002. The FCC has added a caveat stating that ?the ISP industry has changed dramatically since 2002,? but it also has this line: ?Consequently, we estimate that the majority of ISP firms are small entities that may be affected by our action.?

 

The 1997 data have been used for the past decade in all FCC phone company related proposed rulemakings. In addition, recent rulings on almost all the other 36 small business markets listed in the FCC?s Regulatory Flexibility Act section, some of which apply to broadband, use data from 1996, 1999 and 2002. The result is to dramatically harm small business competition in the American communications industry, leading to less choice and poorer phone, broadband, Internet and wireless services.

 

Julius Genachowski, chairman of the Federal Communications Commission, testifying before the House Energy and Commerce Committee in September, said the FCC is going to be ?data-driven in its decision-making process,? and that, ?as the nation?s expert agency on communications, the FCC must have access to, and base its decisions on, data that are robust, reliable, and relevant.?

 

Maybe the FCC?s chairman, the commissioners or the staff don?t read their own proposed rulemakings.

 

The FCC doesn?t have to supply obsolete data. Current information is available to it. The agency is in charge of wireless spectrum licenses and transfers, so commissioners and staff have up-to-date records of what has happened since 1997 to the small wireless competitors. By doing a search on the Web, as I did, the FCC could have found much later data from the Census Bureau and Small Business Administration on Internet providers and all other small business competitors.

 

The FCC is required by the ?Regulatory Flexibility Act? to create an analysis, essentially an impact study, on how the Agency?s regulations will affect small business competitors. Such an analysis is in every FCC proceeding that creates a new rule. However, over the last decade, instead of actually doing an analysis, the FCC has taken boilerplate ? the 1997 data ? and thrown it into the back of each rule making.

 

In addition, by statute the FCC, like all government agencies, is compelled by the Data Quality Act to put out data based on the criteria of quality, objectivity, utility and integrity.

 

If Genachowski is serious about fixing the data, all he has to do is to have someone search the FCC archives or go to the Web and examine the Small Business Administration?s data or Census data.

 

In 2008 and again in 2009 my group, Teletruth, filed complaints about the FCC?s use of decade-old wireless data. We went to the actual spectrum auction information and tracked the companies since 1997. We did all this using Web searches, as well as the SEC?s EDGAR database and FCC materials. The FCC could have done the same thing. This spectrum was supposed to be reserved for ?very small business? entities and ?small business? entities.

 

In that auction seven bidders won 31 licenses that qualified as ?very small business entities,? and one bidder won a license that qualified as a ?small business entity.?

 

What we found was that four of the eight companies? licenses were sold off by 2002 to large wireless companies, including AT&T and T-Mobile; one company never made use of its license, one company couldn?t be found, and two others are subsidized non-profit co-operatives. Thus, small firms hardly exist as wireless competitors.

 

It is clear from examining this one market that had the FCC actually tracked what happened to the small business spectrum, it would have found that the large companies could manipulate the market and that the small business spectrum ended up being mostly a way for the large firms to get billions of dollars in discounts. (Click here for a Teletruth analysis.)

 

In a previous Nieman Watchdog article I outlined how AT&T and Verizon had play-acted as ?very small businesses? to get discounted spectrum.

 

And the ?Internet Service Provider? market information from 2002? The Census has data through 2006 for the same category, and more information about the market through 2009.

 

Had the FCC used the available data, it might not have created laws that blocked these small businesses from offering competitive Internet and broadband service on the phone networks. In fact, net neutrality problems arose because the FCC closed the current networks to competition. With competition, if a phone or cable company blocks, degrades or harms service, a customer can just move to another provider. The FCC?s lack of analysis and accurate data harmed customers? choices in broadband and Internet; thus the FCC is attempting to now create regulations so the remaining duopoly (phone and cable) don?t harm competitors? when they offer Internet service.

 

Imagine taking a class in economics and pulling out 12-year-old data to discuss the current markets. That?s what the FCC has done in the past. It set policies even while noting it didn?t have current data. The data are available, it?s time for the FCC to use them, and to acquire new data as needed.