- The Washington Times - Wednesday, December 12, 2001

With the unemployment rate now at its highest level since the mid-1990s and Congress seemingly handcuffed in its attempt to pass a fiscal stimulus package, perhaps it's time for members of both parties to look for new ways that Uncle Sam can help hot wire the economy for faster growth.

The vote in the House last week to expand the president's authority to negotiate trade agreements that tear down protectionist trade barriers was one such useful prosperity enhancing policy.

Another critical issue for expanding growth is expected to be voted on in Congress later this week. I am referring to the Tauzin-Dingell telecommunications bill. You've been living in a cave for the past 18 months if you haven't heard or seen the millions of dollars in annoying radio and TV ads that AT&T has spent to defeat the passage of Tauzin-Dingell or the millions that the Baby Bells have spent urging its approval. And if you're like about 98 percent of other Americans, you probably have no idea what all the hullabaloo is about. Even most members of Congress have no idea how large the stakes are in this frazzled debate.

If approved, Tauzin-Dingell has the potential over the next decade to bring high-speed broadband service to nearly every home and business in America. Broadband service is the lightning-quick Internet network technology that is the key to pushing the digital economy to new levels of growth and productivity. It is a technology that will convert every personal computer in America into a 21st century multidimensional communications machine. It will do for telecommunications what your cable box and satellite technologies have done for your television.

Economist Robert Crandall of the Brookings Institution estimates that a speedy rollout of broadband could generate $500 billion per year in economic benefits. That prediction is backed up by history. Past efforts at deregulation from airlines and trucking to cable and wireless telephone service to financial services have generated huge gains in economic growth, innovation and greater choices for consumers. Even if Mr. Crandall is off by a factor of tenfold, the gains to the American economy of enacting a deregulation bill like Tauzin-Dingell here are breathtaking.

So what in the world is taking so long? Today only about 1 in 12 homes are wired for broadband access. Worse yet, only about 6 percent of small and medium-sized businesses have access today. This means about 94 percent of the mom-and-pop operations are still on the wrong side of the digital divide.

What we have here is a classic confrontation between a barnacle-encrusted regulatory regime (and its industry beneficiaries, in this case AT&T) clinging to a set of antiquated rules that are slamming the brakes on the adoption of a new-age pro-consumer technology. The last time this happened was with cellular telephones. For years and years the FCC almost single-handedly kept cellular telephones out of the hands of middle-income Americans. Experts now believe that if it had not been for a set of absurd FCC rules, cellular telephones would have gained widespread use nearly a decade earlier than they did. Those delays may have cost the nation tens of billions of dollars in lost convenience, output, and competitiveness.

A nearly identical mistake is now being made in broadband service. A regulatory regime, which grew out of the 1996 Telecommunications Act, was fine for opening up the static old local telephone system to competition.

But they were never meant to apply to new technologies such as broadband.

"Whatever the benefits this act may have had in other areas," says Intel chairman Andy Grove, "it did not really contemplate broadband deployment."

One of the hallmarks of our new age economy is how rapidly new inventions are disbursed to tens of millions of homes and businesses. As the table shows, in less than a decade and a half, inventions like cable TV, microwave ovens, VCRs, cell phones, CD players, personal computers, the internet were affordable and accessible to more than half the population. The same will soon be true of DVD players, flat panel TVs, and palm pilots. But evidently, this virtuous dispersion path it will not be true of broadband access, which has already been in use for nearly a decade and is arguably the most valuable of all new consumer and business technologies.

Completing the broadband buildout and expanding high-speed Internet access will require money and lots of it. By some estimates, private companies will have to invest more than $200 billion to finish the job. But our current regulatory structure, according to technology expert George Gilder, "privatizes the risk and socializes the benefit." Under current law, telecom companies would be required to invest billions of their own money on the infrastructure but then subject themselves to government-set rates to competitors that don't put a penny at risk.

It is no wonder that investment in telecommunications is in a drought condition today. A few years ago investors bet the farm on the reasonable assumption that telecom was the next great profit and growth centers of the information age U.S. economy. Now it is one of the fastest money-losing industries. There are many contributing causes to the shrinking market, but the adverse regulatory structure is at or near the top of the list.

Congress has talked a lot since September 11 about lifting the burden of taxes that restrain growth and capital investment as well it should. But history teaches us that senseless regulation is nothing more than a hidden and expensive tax on American consumers. It now has the opportunity to liberate the economy from the regulatory barriers to broadband investment. And it can do so at precisely the time when it is to America's unquestionable competitive advantage to surge into the global lead in this industry.

Tauzin-Dingell, though far from perfect, has the potential to be a stimulus bill that truly stimulates growth and technological progress.

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