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FCC Chairman Announces Plans for Cable TV-Internet Access Proceeding
WORKING DRAFT
MARKET-DRIVEN CONSORTIA
The Center for Regulatory Effectiveness Table of Contents I. Introduction 1 II. Consortia: The SAE Strategic Alliance Example 3 III. The Future of Consensus and Non-Consensus Processes 4 IV. Developing Both Consensus and Non-Consensus Standards Potential Problems, Benefits, and Trade-Offs 6
1. Potential of Non-Consensus Practices to Undermine Consensus Standards 6 2. Potential for Confusion among Consensus and Non-Consensus Standards Activities 7
1. Participation in SDOs is Open to All Directly and Materially Affected Stakeholders 10 2. Government Participation in the Standard Development Process 11 V. ANSI Review Procedures for Standards 12
VI. Antitrust Issues for MDCs 14
VII. Should OMB Circular A-119 Federal Participation in the Development of Voluntary Consensus Standards and in Conformity Assessment Activities Be Revised? 19
VIII. Market Driven Consortia: The CableLabs Example 24
IX. Conclusions 28 X. Next Steps 30
MARKET DRIVEN CONSORTIA I. Introduction The commercial and economic importance of having an agreed upon set of consensus standards is recognized by both government and industry. The National Technology Transfer and Advancement Act formalizes US government support for the development and use of voluntary consensus standards. The private sector's support for consensus standards is evidenced by industry's extensive participation in voluntary consensus standards organizations, as well as by their use of the standards. The American National Standards Institute (ANSI) is a private, non-profit membership organization which administers and coordinates the private voluntary standards system in the US. ANSI has a Memorandum of Understanding (MOU) with the National Institute of Standards and Technology (NIST, a US government agency) designed to strengthen the voluntary consensus standards system. Under the MOU, ANSI has a number of responsibilities including accrediting Standards Developing Organizations (SDOs) to develop and publish American National Standards; and approving proposed consensus standards as American National Standards. 1 It should be noted that ANSI has been administering the voluntary standards system in the US long before the MOU with NIST and that nothing in the signed agreement undermines ANSI's status and authority as an independent private organization. Although consensus standards in the US may be developed through different mechanisms, the most common development process is through ANSI-accredited SDOs. The ANSI accreditation, as delineated in ANSI's Procedures for the Development and Coordination of American National Standards, indicates that the internal procedures of SDOs must provide for openness, due process (including an appeals process), a balance of interests, and development of consensus. The ANSI accreditation also signifies that the SDO cooperates with ANSI in standards planning and coordination activities and meets the other requirements for accreditation specified by ANSI. The American National Standards designation for proposed standards, as distinct from accreditation for the organization developing the standard, verifies that consensus was achieved by stakeholders directly and materially affected by the standard and with other NIST/ANSI requirements. 1 Although there are benefits to developing standards through a consensus process, there are, in some instances, potentially serious drawbacks to this process, particularly in terms of the lengthiness of the process. Consensus standards can take years to develop or revise. In the fast-developing technology arena, such delays may render the consensus standards process as ineffective and unresponsive to industry needs. As a result of the need by technology-based industries for a timely standards development process, an alternative has developed: market-driven consortia (MDCs). These consortia are associations of organizations which develop technical standards without necessarily adhering to ANSI requirements for openness and consensus. Thus, the consortia are not recognized by ANSI although the non-consensus development groups may include ANSI members and ANSI-accredited SDOs. Even though a standard is not developed through a consensus process, ANSI procedures may still allow for certification of the standard as an American National Standard, provided that ANSI puts the proposed standard through an open consensus process. This paper will discuss the development of MDCs using, as an initial example, the Strategic Alliance organized by the Society of Automotive Engineering (SAE). The SAE is an ANSI recognized SDO. This paper will also examine key issues pertaining to the development of non-consensus standards by consortia, including:
The paper will conclude by examining an additional instance of a standard-setting consortia in light of the issues discussion. II. Consortia: The SAE Strategic Alliance Example The Society of Automotive Engineering is an ANSI-recognized Standards Development Organization. The SAE has almost 80,000 members in over 90 countries. Members include engineers, business executives and other interested parties. Despite using the term "automotive", the SAE develops and publicizes technical information for much of the transportation industry ranging from agricultural equipment to aerospace. The SAE has developed an extensive array of ground vehicle and aerospace consensus standards. As part of its work, the Society has developed the SAE Strategic Alliance (SSA). The SSA is a "partnership" of dozens of major US and foreign corporations in the transportation industry ranging from equipment manufacturers and parts suppliers to airlines and freight companies. The SSA has several functions, including providing an entry point for organizations to participate in the Technical Standards development process. These Technical Standards are domestic and international (ISO) standards developed through a consensus process. In addition to Technical Standards activities, the SSA also offers their partners the opportunity to participate in "Market Driven Consortia". These consortia are initiated by SSA Partners to meet specific needs. A key aspect of these consortia is that they do not need to follow an open consensus process. Thus, although any consortia-developed standards may not necessarily gain the ANSI imprimatur, the SSA partners have increased flexibility in consortia operations. Insight into the impetus behind the development of consortia and non-consensus methodologies can be gained from a report prepared by the SAE's Information to Knowledge Task Force. The Task Force was convened by the SAE Board of Directors to clarify issues related to transforming the SAE from an information providing society to a knowledge providing society. The Task Force defined a "knowledge providing society" as: A society that productively provides the user with real-time, interactive tools and technology to adapt information and knowledge for user's specific needs: speeds delivery of knowledge to the practitioner's desktop and establishes proactive, noncompetitive best practices (not consensus standards) to guide future development of the industry.1 [emphasis added] The Task Force members unanimously agreed that SAE needed to implement a "[p]aradigm shift to the knowledge end of the spectrum"1 Thus, it can be seen that the SAE is concluding that non-consensus "best practices" provided in "real-time" will play an increasing and beneficial role in guiding the development of the transportation industry. III. The Future of Consensus and Non-Consensus Processes The SAE is working on both consensus and non-consensus activities. The issue arises as to what widespread development of non-consensus standards by SDOs means for the future of the consensus standards system. This issue extends beyond the SAE and includes the current and/or future activities of other ANSI accredited SDOs. It would initially appear that, since non-consensus standards are market driven, MDC activities would continue to expand to the extent of market demand for this type of standard-setting activity. However, there are three issues which could alter the current course:
Standards developed through an open, consensus process have a long history of producing useful results. It is because of the success of consensus standards that the consensus process has been embraced by industry and government. The MDC process lacks this track record. Although there may be some benefits to use of a non-consensus process, the associated limits on stakeholder participation and the need to find common ground may result in standards which have limited utility. Given the limited experience with MDCs, participants may not be aware of whether or not the non-consensus process is producing standards which may not fully meet their needs. Ultimately, only experience will determine whether a non-consensus process can reliably produce useful standards that meet the goals of consortia participants. Overall, there are four basic possibilities as to the future of consensus and non-consensus standards:
The rest of this document will explore the issues which may determine the future of consensus and non-consensus standards. IV. Developing Both Consensus and Non-Consensus Standards Potential Problems, Benefits, and Trade-Offs In that the SAE is utilizing both consensus and non-consensus standards development methodologies, it is reasonable to assume that each methodology is perceived as offering certain benefits. However, questions arise regarding an ANSI-accredited organization developing both consensus and non-consensus standards:
A. Potential Problems with Non-Consensus Processes In terms of potential problems from SAE (or other ANSI-accredited SDO) having a foot in both camps, consensus and non-consensus, there appear to be two main potential problems:
It should be noted that the above are potential problems which may be specific to the same organization producing both consensus and non-consensus standards, rather than any potential problems which may result from using a non-consensus process.
B. Potential Benefits from MDCs Although, as described above, there may be potential disadvantages to using a non-consensus process, consideration should also be given to the benefits of the MDC process. It is important to note that development of MDCs by highly respected SDOs, such as SAE, reflects that the consensus process was not always meeting the needs of industry. The study commissioned by SAE's Board of Directors confirmed that the organization needed to speed the delivery of knowledge to the practitioner and that this knowledge delivery would increasingly be accomplished through "noncompetitive best practices" rather than consensus standards. Probably the most important benefit of MDC processes is speed. Specifically, by not needing to obtain consensus among all relevant stakeholder and limiting or eliminating due process and appeals, the timetable for developing the technical document may be significantly accelerated. Two of the most obvious potential benefits from speeding up the development process are that reduced development time means:
The consensus standard development process originated during a time when technology progressed at a slower pace. Moore's Law offers an example of how the consensus process may not always be appropriate in high technology industries. Gordon Moore, one of the inventors of the microchip, stated in 1965 that the number of transistors in microchips would double about every 18 months. So far, this law has held true. Thus, a consensus standards process in an industry utilizing microchips, could be debating a technology which was literally generations out of date. Although this example is specific to microchips, the basic principle about the speed of technological advancement holds true in many industries. It is clear that, at least in some instances, technology-dependent industries need to be able to develop standards is "real time." Failure to develop timely standards could result in the standardization process being moot. An additional potential benefit to some MDC processes is, that by excluding some stakeholders, it may be possible to avoid some compromises, unrelated to competitive issues, which may be undesirable in the view of the organizing party. Such compromises could, in certain instances, reduce the quality and utility of the standard in order to achieve a "lowest common denominator." One of the key potential benefits to non-consensus process is that MDCs, unlike consensus processes, are able to exclude potential participants based on expertise or lack thereof. Thus, the MDC process can be limited to only those stakeholders who are able to substantively contribute to resolving specific issues; an attribute which may have a multitude of benefits. C. Trade-Offs MDCs, as was discussed above, offer both potential advantages and disadvantages. In addition to examining pluses and minuses of MDC processes, it may also be useful to discuss the specific trade-offs that are made in opting for a non-consensus process. The advantages of the consensus process which may not be available to MDCs having a nationally or internationally recognized standard which reflects the needs of virtually all materially affected stakeholders. Other advantages of the consensus process which may not be available to MDCs include ANSI's coordination which ensures that a given standard is does not duplicate or conflict with other standards as well as ANSI requirements that the standard is maintained on a regular basis. There are two additional potentially significant advantages with regard to the consensus standards process that me be lost to MDCs. As is the case with many was learned
Not surprisingly, there are benefits and drawbacks to both consensus and non-consensus processes. The net balance of the pluses and minuses will depend on the specific project as well as any relevant legal considerations. V. ANSI Review Procedures for Standards As was noted earlier, it is possible for standards developed through a non-consensus process to attain ANSI recognition as an American National Standard. ANSI's Procedures specifies three possible methods for determining the existence of consensus on a proposed standard. These methods of consensus development are:
A. Accredited Organization Method The accredited organization method of consensus is the mechanism most commonly used by organizations which have, among their activities, an interest in developing standards. This method of standards development requires that the organization develop operating procedures which meet the requirements specified by ANSI for consensus, i.e. that the organization develops standards though an open consensus process and meets the other requirements specified in Sec. 2.2 of Procedures for the Development and Coordination of American National Standards. B. Accredited Standards Committee Method An Accredited Standards Committee (ASC) is a forum which has been created by stakeholders for the purpose of developing consensus standards in a given subject area and submitting the standards to ANSI for approval. The committee method is often used instead of the organization method when the subject issue would affect a diverse array of stakeholders. Thus, where the accredited organization method concerns standards may be primarily relevant to a given industrial sector, the committee method is used to develop consensus standards which are relevant across industries. For example, Accredited Standards Committee X9 (ASC X9) develops financial industry standards relating to issues such as check processing and fund transfers. Although administered by the American Bankers Association, the committee includes such diverse interests as computer companies, accounting and consulting firms, telecommunications service providers, and paper manufacturers. C. Accredited Canvass Method The accredited canvass method provides a process by which consensus may be obtained on documents which were not developed through a consensus process. Under this methodology, relevant stakeholders are surveyed (canvassed) to determine consensus. The canvass is conducted by an accredited sponsor. ANSI has specified a detailed procedures for the canvass methodology in Annex B of the Procedures. The key elements of the canvas method of consensus include:
The canvass process potentially allows a non-consensus consortia-developed standard to achieve ANSI-certified consensus status. Thus, there is an ANSI process which may bridge the gap between consensus and non-consensus development processes. Therefore, it may be possible, in some instances, for stakeholders to gain benefits from both the MDC and consensus processes. VI. Antitrust Issues for MDCs A. Antitrust Background As was discussed in the Introduction, MDCs are groups of industry associations or companies which develop standards-like technical documents without adhering to ANSI requirements for consensus. The decision of MDCs to not adhere to ANSI procedures. raises some potentially significant legal issues:
B. Antitrust Considerations From the above, it is clear that market driven consortia are a category of standard-setting body (the other category being ANSI-approved bodies). No Federal cases have addressed "market driven consortia" per se. However, numerous cases have addressed the antitrust implications of standard-setting bodies generally. The key case is Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 108 S. Ct. 1931 (1988), which held that the activities of private standard-setting bodies are subject to the antitrust laws. In Allied Tube, the National Fire Protection Association was voting on a proposal to revise its electrical wiring code so as to approve the use of plastic conduits. Steel conduit manufacturers "packed" the Association's annual meeting with manufacturers and agents who joined the Association solely for the purpose of voting down the plastic conduit revision. When the proposal was defeated, the plastic conduit manufacturer sued the steel conduit manufacturers for violations of the antitrust laws. The U.S. Supreme Court upheld the Second Circuit's decision that, while an attempt to round up supporters to dominate a governmental decision-making body or process is protected by the constitutional right to petition the government, this right does not apply to an attempt to influence a private organization. Therefore, general antitrust principles were applicable to determine whether the steel conduit manufacturers had engaged in unlawful concerted action to thwart competition. Allied Tube established the following key principles:
Allied Tube involved a standard that was purportedly necessitated by safety concerns. The extent to which the Allied Tube reasoning would apply to a standard-setting process motivated primarily by economic, as opposed to safety, considerations (e.g., a standard aimed at enhancing the ability to sell a product in foreign markets) is unclear. Arguably, where the standard is not necessitated by safety concerns, the potential for antitrust liability may be greater. Other authorities suggest that the following actions by a standard-setting organization (or a dominating company or companies within the organization) could serve as predicates for antitrust liability:
As applied to the MDC context, Allied Tubing suggests that the potential for antitrust liability is not dependent upon whether the organization that sets the standards is or is not ANSI-accredited. Rather, a court would look to the unique facts and circumstances of each standard-setting proceeding, and consider the following questions:
In sum, if the MDC mechanism is utilized to expedite an inclusive, consensus-based process aimed at achieving a procompetitive result, then the MDC standard should not result in antitrust liability. If, on the other hand, the standard-setting process was used as a subterfuge for excluding competing products from the market, then antitrust liability could result. VII. Should OMB Circular A-119 Federal Participation in the Development of Voluntary Consensus Standards and in Conformity Assessment Activities Be Revised? OMB Circular A-119 includes two key standards-related functions:
The question is whether, in light of the issues discussed in this paper, is there a need to revise the Circular? A. Why OMB's Definitions of "Consensus" and "Consensus Standards Body" are Important to SDOs and MDCs As was discussed in Section I, ANSI has a signed agreement with NIST which specifies responsibilites by each party. The agreement to strenghen the consensus standards system in between ANSI and NIST since: 1) ANSI has historically been responsible for administering and coordinating the US system of private consensus standards; and 2) NIST is responsible for coordinating federal activites with regard to voluntary standards and to ensure adaquate representation by US interests in all relevant international standards organizations. NIST receives its authority regarding standards issues through: the National Technology Transfer and Advancement Act of 1995 (PL 104-113); the Trade Agreements Act of 1979 (PL 96-39); and OMB Circular A-119. The Act requires NIST to develop, and provide to Congress, a plan for implementing the Act. As part of its Implementation Plan, NIST directs that OMB, in consultation with NIST, "[r]evise OMB Circular A-119 to implement the Technology Transfer Act." Thus, OMB is defining both "consensus" and "consensus standards body" is response to a Congressional mandate. Since: 1) Circular A-119 defines the terms "consensus", "consensus standards body" and related principles (openness, due process, etc.) for the whole federal government, including NIST; and 2) NIST has an agreement with ANSI recognizing ANSI's responsibilities to develop and publish American National Standards in accordance with these principles, it is reasonable to presume that these principles specified in the MOU, including "consensus", are defined by the OMB Circular. Thus, it is incumbent upon ANSI-accredited SDOs, discussed in the MOU under ANSI responsibilities, to adhere to the relevant definitions contained in the OMB Circular even though the Circular never explicitly mentions ANSI or American National Standards. The OMB definitions of consensus and consensus standards body are also of relevance to MDCs since, in light of the antitrust discussion in the previous section, these organization may want to selectively adopt elements of the consensus process. It is also important to note that the Circular provides a definition of "non-consensus standards." Non-consensus standards are defined as standards which are developed in the private sector but not through a "full consensus process." B. How OMB's Definition of Consensus Compares With ANSI OMB Circular A-119 states that a voluntary consensus body is defined by the following attributes4:
These requirements are compatible with ANSI's requirements for due process, openness, balance, and an appeals process as well as consensus. The primary difference between OMB's definition and ANSI requirements, for the first four categories, is that ANSI provides greater definitional detail. For example, whereas the Circular simply specifies "balance of interests", ANSI's Procedures provide a description of what balance means. Specifically, ANSI requires that no interest category dominate the proceedings and provides a definition of dominance. Furthermore, ANSI specifies the interest categories to be included in the standards development process. The potentially significant difference between OMB and ANSI is on the definition of "consensus." OMB employs what appears to be a somewhat looser definition of consensus. OMB defines consensus as "general agreement, but not necessarily unanimity," By contrast, ANSI describes consensus as "substantial agreement among directly and materially affected interest categories." ANSI goes on to describe substantial agreement as meaning more than a simple majority but less than consensus. Both ANSI and OMB require that all views/comments be fairly considered and that there be a process for attempting to resolve objections. Although certainly not in contradiction to the OMB Circular, ANSI's Procedures provide somewhat greater detail. However, both ANSI and OMB definitions of consensus provide a significant grey area between more than a majority and less than unanimity. OMB's somewhat skeletal definition of consensus and consensus standards body raises the possibility of OMB revising the Circular to tighten the definitions. Such a revision could potentially include adding at least some of ANSI's explanation of openness, balance, due process, and appeals to Circular A-119. Similarly, it may be possible for OMB, ANSI and other interested parties to collaborate on enhancing the clarity of the Circular's definition of "consensus." One of the advantages of an enhanced definition of consensus is that disputes over what constitutes consensus may be reduced. Reduced dispute may make the consensus standards process more attractive to current and prospective standards developers. Furthermore, an enhanced definition of consensus may allow for organizations to make a more informed decision between a consensus and non-consensus standards development process. C. OMB Recognition of Non-Consensus Standards Since the Circular specifically address voluntary "consensus" standards, it would initially appear that the document would have relatively limited relevance to MDC non-consensus standards. However, the OMB Circular explicitly states that there is no federal preference between consensus and non-consensus standards that are developed in the private sector.5 Therefore, MDC non-consensus standards are accorded equal treatment to consensus standards in matters of regulation and procurement by the Circular. Under the OMB Circular, it appears that a standard produced by an SAE-organized consortia, or any privately developed standard, would have equal weight with a consensus American National Standard in both regulation and procurement activities. There are three potentially significant issues raised by the OMB Circular providing equal preference to consensus and non-consensus standards:
VIII. Market Driven Consortia: The CableLabs Example Cable Television Laboratories (CableLabs) is an association of cable television operators in North and South America. CableLabs conducts research and develops technical specifications for the cable television industry. The MDC's work includes standards for interoperability between interconnected cable systems and also between cable systems and other types of networks such as telephone systems and the internet. CableLabs is not an ANSI-recognized SDO. It should be noted that there is an ANSI-accredited SDO for the cable television industry, the Society for Cable Telephony Engineers (SCTE). CableLabs does, on some occasions, have SCTE put CableLabs standards through a consensus process. A. CableLabs Development of an MDC Non-Consensus Standard for Cable Modems CableLabs developed the standard for cable modems, the Data Over Cable System Interface Specification (DOCSIS), through a non-consensus process. The DOCSIS standard was not submitted to SCTE or ANSI for review. However, the cable modem standard was submitted to the International Telecommunication Union (ITU). The ITU is an international consensus standards organization. As was noted above, under OMB Circular A-119, international consensus standards are given equal weight with domestic consensus standards.
B. The FCC's New Role in Determining Cable Television-Internet Interconnection Policy CableLabs role in developing standards to permit interconnection between cable television systems and the internet may be of heightened significance in light of a recent decision by the Ninth Circuit Court of Appeals. The decision in AT&T v City of Portland gave to the FCC the policy decision on whether cable television operators which offer internet access should be required to open their systems to competing internet service providers. As a result of the court decision, the FCC is initiating a proceeding on "Cable Access." The purpose of the proceeding is to determine whether the FCC should require open access, not set standards for such requirements. However, Chairman Kennard, in a June 30, 2000 press release, stated that his goal is to achieve an open cable platform and the question is whether that goal would be reached through regulation or market forces. Although the FCC Cable Access proceeding is to determine policy, the standards for interconnecting cable systems with other networks may play a significant role in how the FCC's policy is implemented. Any allegations regarding potentially anticompetitive behavior by CableLabs may take on added significance as a result of the FCC proceeding given the FCC's reliance on CableLabs for cable infrastructure standards development work on other issues. Specifically, the FCC, in CS Docket 97-80, designated CableLabs' Open Cable project as having primary responsibility for setting standards for set-top boxes for digital cable systems. It is important to note that the FCC set up a monitoring process for the project. The FCC requested that the National Cable Television Association (NCTA) monitor CableLabs progress, based on a series of milestones, and provide semi-annual reports to the Commission in developing the standards for digital set-top boxes. The FCC 97-89 proceeding is interesting in that it presents an novel model for federal use of standards developed by MDCs; monitoring and reporting on the MDC's work by a third party. There is not any discussion of this policy option in OMB Circular A-119. When evaluating the FCC decision to use an MDC to develop the digital navigation (set-top box) standard, it is important to consider that one of the Commission's key goals in the proceeding meshed with one of the advantages of MDCs discussed in the Introduction, rapid development of the standard. Overall, the following conclusions may be drawn from considering: Ameritech's allegations regarding CableLabs; the FCC's use of CableLabs for standards development; and the FCC Cable Access proceeding:
IX. Conclusions
X. Next Step
1 Memorandum of Understanding between The American National Standards Institute and the National Institute of Standards and Technology, Sec. 3.3. 1 ANSI, "Procedures for the Development and Coordination of American National Standards," April 1998, p. iv. 1 SAE, Executive Summary of the March 5, 1999 Board of Directors Meeting, Information to Knowledge Task Force Report. 1 Ibid. 2 ANSI Procedures, p. 1. 3 The fact that acting under the umbrage of a recognized consensus standard setting body does not necessarily or absolutely guarantee participants from antitrust liability is borne out by the Allied Tube case (discussed below). 4 OMB Circular A-119 Federal Participation in the Development of Voluntary Consensus Standards and in Conformity Assessment Activities, Sec. 4(a)(1). 5 OMB Circular A-119 Federal Participation in the Development of Voluntary Consensus Standards and in Conformity Assessment Activities, Sec. 6(g). 1 "A Case for Open Standards Development in the CATV Industry" [Draft], Ameritech, December 9, 1999. 2 Ibid., p. 2.
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