- The Washington Times - Monday, July 30, 2001

The public relations war over the Internet Freedom and Broadband Deployment Act of 2001, H.R. 1542, also known as the Tauzin-Dingell bill, reached a crescendo last week as supporters pressed to get a vote on the House floor before next month's congressional recess. The bill, which would lift some of the regulations that the 1996 Telecom Act imposed on local phone companies, or regional Bell operating companies (RBOCs), has been touted by supporters as a cure-all for tech- and telecom-industry woes.
The 1996 Telecom Act was intended as the first step in transforming the RBOCs, which monopolized the local voice and data market, into legitimate competitors that government no longer would need to regulate. The act's mechanism for this transition was to introduce competition by mandating that the RBOCs open their local networks to companies called competitive local exchange carriers (CLECs) at wholesale rates. Instead of imposing large penalties, the act created an incentive: The RBOCs would be allowed to enter the long-distance market if they complied. Tauzin-Dingell would allow the RBOCs to enter long-distance without having to prove to the Federal Communications Commission that they have opened up the data side of their local networks to competition. In effect, the bill would remove the RBOCs' incentive to allow the CLECs to use their networks, practically ensuring the demise of the CLECs.
With the stakes so great for the parties with an interest in the bill, lobbies on both sides have flooded the media with a confusing glut of rhetoric. In addition, two much-hyped reports were issued last week, one purporting that Tauzin-Dingell would add $500 million annually to the U.S. economy, and another claiming that it would result in between $57 billion and $88 billion in lost gross economic output by 2006. On the legislative side, two pro-regulation bills are being pushed as alternatives, though they give the same guarantee as Tauzin-Dingell a revival of the tech and telecom industries.
Despite this clash of agendas, all three pieces of legislation are being promoted with the same urgent message: Broadband is not being rolled out fast enough. Watching fuzzy, 2-by-3-inch video images on a computer monitor the kind of video quality afforded by low-speed, dial-up Internet access cannot begin to compete with the audio and video quality to which consumers are accustomed from their televisions and home entertainment systems. High-speed broadband access enables greatly improved media quality if still not exactly hi-fi as well as the power to run complex online applications and the ability to surf the Net at accelerated speeds. The failure of broadband to reach more homes, the argument goes, has severely stunted the entire high-tech industry, from e-businesses to chip manufacturers.
Those who support lifting regulations on the RBOCs argue that if the RBOCs hadn't had their hands tied by the Telecom Act, broadband would have been deployed much faster. Those who want to enforce more strictly the current regulations argue that the slow pace of deployment is due to the decline of the CLECs, which can be attributed to a lack of cooperation from the RBOCs and the market's discomfort with the progress of the Tauzin-Dingell bill.
Funny thing, then, that while both sides cling to the argument that broadband is being deployed at an "unnatural" rate, all indicators suggest quite the opposite. An upcoming Cato Institute study by telecom consultant Wayne Leighton reveals that service options in the broadband marketplace are growing rapidly and that Americans are gaining access to broadband services at a much faster rate than previous technologies. This can, in part, be attributed to the competition that the CLECs have posed for the RBOCs. However, the cable industry poses competition as well with its own broadband technology, and the satellite and wireless industries provide further alternatives. In fact, the cable industry owns a majority some 70 percent of the broadband market. This raises the question: If the RBOCs already have major competition in the broadband market, why should the government continue to restrict their operations, with regulations intended for the voice market, when they do not have the ability to monopolize the broadband market?
The answer depends on how one perceives the RBOCs. Those who believe that the RBOCs have embraced the competitive environment that the Telecom Act was meant to nurture would agree that government has no place in regulating their broadband operations. Those who are less sure that the RBOCs have changed substantially from their days as a government-regulated monopoly, however, have serious doubts about whether a market devoid of the CLECs is competitive enough that government won't have to re-regulate. This latter group has pointed out that a market in which the cable industry and RBOCs are the main competitors may not be truly competitive. They also have noted that cable broadband access is not yet available in many areas.
These are serious considerations, and legislators rightly have been hesitant to hastily endorse a bill that would radically change the competitive landscape of the telecom market. The pace of broadband deployment is hardly sluggish, and there are no quick fixes for the tech industry's current situation. Thus, Congress is right to be skeptical of legislation that would dismantle the 1996 Telecom Act prematurely.



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