Wednesday, April 20, 2005

Developing communications policy in America is like sculpting ice in the desert — the original edifice usually melts before the job is finished, leaving lawmakers with, at best, a soggy foundation. So, as Congress considers amending the 1996 Telecommunications Act this year, it should do an editorial update rather than a rewrite from scratch — acting otherwise risks trying to “fix” problems already eclipsed by rapid technological advances.

Still, certain changes are essential. But clearing out anti-competitive underbrush instead of creating new regulatory regimes should be Congress’ goal — a kind of “Hippocommunications Oath” that first does no harm to an increasingly choice-filled, vibrant telecommunications market.

“Policymakers always address what they think is the permanent paradigm,” a veteran telecommunications lobbyist told me. “But even before they’re done, the paradigm usually shifts.”

History backs up his claim. In the 1982 AT&T Consent Decree, policymakers thought the paradigm was clear. Local telephone companies like SBC and Verizon were boring, permanently regulated monopolies, while long-distance providers like AT&T and MCI were deregulated darlings, offering a broad range of innovative products and services. But competition and technology quickly shifted the playing field again.

Fast forward several years and a new paradigm emerged. By the 1990s a variety of companies wanted to provide both local and long-distance service. Everybody wanted into everyone else’s business. Moreover, the cable industry was itching for its own deregulatory legislation. Bell companies — barred by the 1982 consent decree from providing long distance, wanted in. Long distance and other competitors, furthermore, sought to offer local service. Everybody needed something, resulting in the 1996 Telecommunications Act.

But the paradigm of promoting “competition” by mandating access to local telephone company networks, as the U.S. Chamber of Commerce argues in its recent report, Teleconsensus, sent confusing signals that discouraged new investment in technology. The 1996 Telecom Act, while eventually litigated all the way to the Supreme Court, was outdated not long after it passed. “The 1996 Act assumed three things,” a knowledgeable telecommunications consultant told me. “That forcing companies to share their networks would work; that the Internet would stay a nascent industry; and that cell phones would remain a marginal product. Believing those three things today is about the same as thinking the world is flat.” Today’s paradigm is still emerging. Traditional telephone companies, cable operators, satellite services and wireless networks will provide a wide array of services to customers.

Recognizing that legislation slowly yawns, while technology quickly blinks, a dose of caution should accompany any legislative cure. Clearly, anything that expands regulation should be off the table. For example, the provision in the ‘96 act that allows states to regulate wireless providers if they are deemed to substitute for regular telephone service should be repealed. Moreover, Congress should also assess how local governments impose exorbitant hidden fees on the communications industry. Overcharging for rights of ways and excessive fees for important services like E911 are hidden ways local governments suck vital capital out of the communications industry, keeping prices to consumers artificially high.

A case currently pending before the Supreme Court (FCC v. Brand X Internet Services) could also lead to re-regulation of certain cable Internet services.If the court rules against the FCC, in effect opening the door to re-regulate certain cable services, Congress should intervene and ensure deregulation of Internet services offered by cable, as well as those offered by telephone companies (DSL).

Congress should address regulatory asymmetries among competitors by easing the rules on those more regulated rather than imposing new restrictions on firms that currently face less — finding parity by deregulating incumbents rather than imposing old rules and regulatory regimes on new services. For example, lawmakers should ease rules on telephone companies, rather than impose new ones on cable.

If cable, telephone and eventually wireless and satellite companies are treated equally in terms of taxes and regulation, the Hippocommunications Oath will not only have been met, but consumers will enjoy faster, better, cheaper products, and communications will continue to improve the productivity of the American economy.

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