It’s a bad time for the federal regulatory bureaucracies. The U.S. Supreme Court has rebuked one regulatory agency the Food and Drug Administration for overstepping the limits of its authority as far as cigarettes are concerned. And now a leading member of the House of Representatives has warned against another power-grabbing regulatory agency, the Federal Communications Commission (FCC), whose actions, he said, could do “irreparable damage” to the Internet.
Rep. Christopher Cox has fired a broadside against the FCC, whose existence, based on the 1934 Communications Act, is more than being an utter irrelevance in the Age of the Internet but could be, potentially, a positive hindrance to its future growth. Mr. Cox is author of the law which abolished what had become the vestigial Interstate Commerce Commission (ICC).
The FCC was created at a time when it was assumed that the phone monopoly was a natural one, that airwaves would always be scarce and that no technology would ever deliver phone calls through the air or radio programs over wires. So the FCC bureaucracy created its own mandate to (1) regulate all interstate and foreign communications by wire or by radio and (2) to write any rules and regulations it thought would be consistent with what it defined as the public interest.
“Today it is clear,” says Mr. Cox, “that this extraordinary mandate for almost unlimited regulation is wildly out of step with today’s competitive communications marketplace. While the 1996 Telecommunications Act did make important changes, such as opening up the Baby Bells to competition, it didn’t articulate a clear vision of a world beyond the Federal Communications Commission. The 1996 law mostly left the FCC a broad regulatory reach intact.” Mr. Cox argues that FCC actions caused a 20-year delay in the introduction of cable TV and a 10-year delay in the introduction of cellular phones.
The Internet faces an FCC regulatory threat, says Mr. Cox, if it were able to control Internet telephony, a technology which enables the delivery of voice-grade data through the Internet’s decentralized protocol. If Congress prevents the FCC from regulating Internet voice services, as it should, it would be difficult for the commission to regulate any other Internet service.
Mr. Cox’s objection to FCC in the Age of the Internet is, first, its power to impose price-controls which, the law states, are “just and reasonable,” and the FCC decides what’s just and reasonable; and, second, its requirement that a provider of voice telephony must be certified by the FCC, a requirement which discourages new entrants into the marketplace.
For the moment, the FCC has maintained a hands-off policy on Internet telephony, which is increasingly combining voice and other kinds of data. New Internet technology, Mr. Cox points out, presently allows you to check voice mail, e-mail, pages and faxes through a single source using a voice interface.
“Voice over the Internet,” said Mr. Cox, “is quickly emerging as a competitive alternative to the Baby Bells in the local arena, as well as to traditional long-distance phone companies. Last year, the number of phone calls placed on the Internet increased twelvefold, from 200 million calls in 1998 to 2.5 billion calls in 1999.”
Internet telephony doesn’t require a dedicated circuit between two parties, like traditional telephony. Result: cheaper long-distance calls. Good thing, no? Not to “the players in the old, regulated industry [who] are pleading with the FCC to drag Internet voice services into the regulatory hell where they already live,” Mr. Cox points out.
And now a new threat: The FCC has recently initiated a study to determine whether it could regulate Internet voice services including computer technology, equipment and software even though “the entire history of the computer business has been one of responding to consumer demands without government mandates,” says Mr. Cox.
In other words: consumers, beware.