Section 706 of Telecom Act offers FCC little to address telecom infrastructure deficit

Net neutrality storm engulfs FCC - POLITICO: FCC officials are meeting with congressional staff this week as Wheeler tries to better explain the options on the table to industry players and the public interest community. Across those meetings, the FCC chairman and his aides haven’t tipped their hand about how they want to proceed, according to multiple sources. The officials have given a rundown of the various options, including adopting the utility-style regulation known as Title II, using a weaker authority known as Section 706 or some combination of the two — but failed to lay out a clear path forward, the sources said.

Section 706, found in Title VII (Miscellaneous Provisions) of the Communications Act, isn't really a mandate on telecommunications providers. Rather, it merely affords the Federal Communications Commission authority to issue rules creating incentives to remove barriers to telecommunications infrastructure investment and to promote competition.

The main barrier to wireline Internet infrastructure investment that according to the FCC has left about 19 million American homes without Internet connections is economic, not regulatory. The business models of investor-owned providers typically require relatively quick return on monies invested to build infrastructure. In less densely populated areas, there is greater risk that standard won't be met, extending out the time for investors to break even and begin generating profits. No FCC rulemaking can change those economics.

The FCC provides subsidies to help bridge the gap (the Connect America Fund), but providers have generally spurned them. Instead, they've concentrated capital investments in more densely populated and profitable parts of their service territories and in mobile wireless services.

As for removing barriers to competition, there is little the FCC can do within the existing market-based model for telecommunications service. That's because telecommunications infrastructure is a natural monopoly that due to high cost and risk barriers deters would be competitors from entering the market.