FCC proves (yet again) that easy forbearance under Title II is a myth

In the ongoing push for heavier regulation of the Internet, pro-regulation advocates try to downplay the impact of imposing 80-year-old telecom rules on the Internet by invoking the concept of “forbearance” as a magic wand that will simply make all the harmful aspects of Title II disappear. Public Knowledge’s Harold Feld has written that, “Title II forbearance is actually so easy it makes [him] want to puke.” Well, the D.C. Circuit and the FCC have provided more evidence that the forbearance process is nauseating, but not because it is easy.

In early 2012, the U.S. Telecom Association filed a petition with the FCC asking for forbearance from a number of rules that were written for a bygone era and no longer necessary. One of these rules is the “Part 32 Uniform System of Accounts.” Unless you are one of the few dozen accounting types at a company where this accounting still is required, you’ve probably never heard of Part 32 rules – and for good reason. Part 32 requires some companies to maintain two separate sets of accounting records: normal financial books prepared in accordance with generally accepted accounting principles (GAAP) plus regulatory books using the FCC-mandated uniform system of accounts. Why the requirement to keep a whole second set of different accounting? As the FCC explains, these requirements were adopted “to record company investment, expense, cost and revenue for rate-of-return rate regulation.”

But wait, you say, companies like Verizon ceased operating as rate-of-return regulated carriers decades ago, didn’t they? Exactly. Thankfully, we have the forbearance process that allows the FCC to remove this anachronistic rule so fast that Mr. Feld is tossing his cookies in his office over at PK.

Not so fast, however. Last year, the FCC rejected the request to forbear from the Part 32 accounting rules. So we appealed that decision to the D.C. Circuit. Last Friday the court released its decision [PDF], noting that the need for the Part 32 accounting data “appears marginal,” but concluding that the FCC is entitled to deference in its decisions so the court wasn’t in a position to second-guess it. So at the end of a process lasting almost three years, the “easy” forbearance process has failed to achieve the simple task of doing away with a requirement that has been obsolete for decades.

And this is the process that pro-regulation advocates are counting on to keep rotary-telephone-era regulations from harming the Internet ecosystem? It’s enough to make you sick.