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Spalter: FCC Should Withdraw ‘Third Way’ Approach

For those monitoring the health of America’s innovation economy, August has not only been the cruelest month, it has also been the most confusing.

[IMGCAP(1)]By Aug. 6, negotiations led by the Federal Communications Commission over “net neutrality” principles were abruptly suspended. Days later, Google and Verizon announced a separate peace regarding the rules of the road for the Internet, leaving most other stakeholders in the industry, on Capitol Hill and on Wall Street and Main Street wondering what such a deal would mean for them. Meanwhile, Congress is gearing up for possible legislation as FCC leaders are weighing their next steps.

These moves all have real-life implications for the hundreds of millions of Americans who use the Internet, for the American companies that are investing hundreds of billions of dollars to enable them to do so and for the millions of Americans employed by these companies. And nothing will be more consequential than the decisions that FCC Chairman Julius Genachowski will make in coming days regarding his agency’s future role in Internet regulation.

With far fewer bureaucratic cards left to play, and the clock ticking, many are concerned Genachowski will fall back to his earlier plan that would have the FCC unilaterally impose a new set of rules governing how American technology companies, broadband providers and consumers can interact with each other and with the Internet.

The stratagem that he unveiled in May is called the “Third Way.” Using sophisticated regulatory archeology and legal analysis, Genachowski’s Third Way dusts off an old bill passed by Congress in 1934 to regulate the then-nascent American telephone industry and, by reclassifying portions of that law, turns the FCC by fiat into America’s Internet traffic cop.

But for many consumers and technology innovators, as well as for many on both sides of the aisle in Congress, Genachowski’s Third Way is a nonstarter. The concern, which is deeply felt by many in America’s innovation industries and by the capital and debt markets that support them, is that by resorting to an old-style “my way or the highway” form of regulation, the FCC risks taking America’s innovation economy back to the bad old days of heavy-handed big government, an approach that has proved time and again to be a significant buzzkill for investment and innovation. This is exactly the wrong time, they say, for the FCC to impose a potentially stifling regulatory agenda on a communications marketplace that has been one of the few lasting economic success stories of the past several years, despite the recession, and is poised for a new era of even more growth. However, this growth won’t happen on its own and will require hundreds of billions of dollars in new private-sector investment and risk-taking in order to succeed.

So what is the solution?

I believe Genachowski can responsibly — and with broad consensus — ensure the future of an open Internet by first taking the courageous step of withdrawing his unilateral and controversial Third Way proposal. In its place, he should explicitly recognize that a decision to fundamentally alter the regulatory landscape, especially when it directly implicates the Internet, requires legislative action, and as a result, he should encourage lawmakers in Congress to take on the hard but important work of creating a new, bipartisan and workable framework for continued American growth, investment and innovation in the Internet.

In doing so, Genachowski actually would affirm the core principles for which his proposal was cleverly named. For in calling his proposal the Third Way, Genachowski sought to give his ideas broad-based appeal by evoking the political and policy approach of the same name advanced so successfully in the 1990s by leaders such as President Bill Clinton and British Prime Minister Tony Blair.

The original Third Way not only paved the way for the creation of a vibrant new political consensus, but it sparked for the better part of a decade unprecedented economic growth, massively reduced deficits and unparalleled investment in innovative industries. It did so by adapting more enduring progressive values to the information age. Among these were the view that government operates best when it empowers its citizens to act for themselves and that the approach to economic opportunity and security stresses technological innovation, competitive enterprise, public-private partnerships and transparency rather than top-down redistribution or regulation.

For Genachowski, the task now is to pursue a true Third Way by moving boldly away from the old-style orthodoxy of top-down government and toward a more enlightened approach that would encourage a marketplace of innovation, an engaged self-directed citizenry and a light-touch perspective on regulation.

To do this, Genachowski needs to acknowledge that his only reasonable path forward in securing an open Internet and the future of America’s innovation economy is to support Congressional action to forge a durable consensus on American Internet policy.

Jonathan Spalter, chairman of Mobile Future, has been founding CEO of leading technology, media and research companies, including Public Insight, Snocap and Atmedica Worldwide. He served in the Clinton administration as a director on the National Security Council.

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