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Because our communications policies are still mired in 20th century regulations tied to 19th century ideas concerning regulation of the new railroads, they are in dire need of a deregulatory overhaul. After all, even the railroads were deregulated a quarter century ago.
Today's competitive communications marketplace is indisputably much different than the mostly monopolistic one that characterized much of the last century.
While there have been some deregulatory steps since passage of the 1996 Telecommunications Act, much more needs to be done. Further loosening of the regulatory grip would stimulate investment and innovation in high-tech market segments, providing a long-term, sustainable boost for the American economy.
So what to do? The existing Communications Act, which ties regulatory activity to outmoded techno-functional regulatory constructs, should be replaced by a statute tying regulation firmly to marketplace realities. What would then matter would not be whether a service is classified as "telecommunications," "cable," "broadcasting," "mobile," and so forth, but whether services face marketplace competition.
In a converging world in which telephone companies offer video and Internet service; cable companies offer telephone and Internet; and wireless companies offer all voice, video, and data; the decision of whether or not to regulate should be based on competitive realities.
Moreover, a new communications law should also point the Federal Communications Commission toward regulating predominantly through adjudication rather than rulemaking. Complaint-driven adjudication, necessarily focusing on specific situations, is more likely to lead to narrowly drawn regulation than rulemaking proceedings which, by their very nature, are overbroad because they generally try to anticipate all possible harms.
And often by the time the cumbersome rulemakings are completed, technologies and markets have changed so much that whatever regulation is proposed is obsolete on arrival.
Sen. Jim DeMint, a South Carolina Republican, made a good start two years ago when he introduced a deregulatory competition-based bill. A change-oriented presidential candidate, and reform-minded congressional candidates, could lay the groundwork by picking up the reform mantle.
In the meantime, the FCC itself ought to take certain actions this year to effect free market-oriented change:
Reform the bloated Universal Service subsidy system, which is intended to ensure that all Americans have access to affordable communications services. Universal service is a worthy goal, but the current system provides wasteful, untargeted subsidies in ways that are not technologically or competitively neutral. All telecommunications users now pay, in effect, a 10 percent tax on their phone service, a tax that will continue to grow if left unchecked.
Last year, a panel of federal and state regulators led by FCC Commissioner Deborah Tate and Oregon Public Utility Commissioner Ray Baum made worthwhile reform recommendations that the FCC should adopt.
They include placing a cap on the size of the subsidy fund, employing auctions as a method of determining which communications providers can serve high-cost areas on the least costly basis, and stopping wireless carriers from receiving subsidies based on the support received by the incumbent wireline carriers, even though the wireless companies generally have lower costs.
Reject proposals to impose Net neutrality regulation on broadband Internet service providers like AT&T and Comcast. Even in the face of exploding traffic demands and ever-changing forms of spam and other forms of malicious traffic, Net neutrality advocates are asking the FCC to assume the role of an uber-network manager.
Now, under the guise of determining the "reasonableness" of the providers' network management practices, Net neutrality advocates really want to put today's competitive broadband providers in last century's common carrier straightjackets, depriving them of any freedom to treat network traffic differentially or to integrate services and applications, even when such differential treatment or integration is more efficient and leads to a more consumer-friendly Internet experience.
The FCC needs to send an unmistakably clear signal that it is going to adhere to the deregulatory policy it adopted in 2002 for broadband Internet services.
The FCC should implement an institutional reform by combining its separate wireline, wireless, and media bureaus into a new broadband bureau. Many functions performed by these individual offices, such as information-gathering and policy analysis, could be performed more efficiently in a single broadband bureau with a slimmed-down staff.
A broadband bureau under unified leadership would focus the agency on the reality that wireline, wireless, and cable services are now mostly broadband and that firms in the formerly distinct market segments increasingly compete against each other in one marketplace. This should lead to a more consistent deregulatory broadband policy.
The FCC should approve the XM-Sirius satellite radio merger. Because satellite radio is part of the broader audio information and entertainment market that includes terrestrial broadcast stations, wireless audio services, iPods and similar MP3 devices, and the Internet, prompt agency approval of the merger would show it appreciates the dynamic, competitive nature of the communications marketplace.
And, in a show of self-restraint, the commission should eschew the imposition of last-minute merger conditions that are not related to any putative competitive harm.
With change in the air, at least rhetorically, the FCC should implement meaningful market-oriented reforms this year--setting the stage for more lasting, fundamental changes in our communications laws in the following years.
Biography
Randolph J. May is president of the Free State Foundation, a Maryland-based think tank. The views expressed here are his own.
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These companies have made huge profits and made marginal investments on the backs of consumers for years. They need to pony up before we take off the training wheels!
Market-oriented blather is merely a lousy excuse to use right-wing political ideology to justify harming the public.
I'm certainly glad to be a Canadian when I hear and read this sort of "Horse-Hockey" being spewed as rational consideration to be undertaken by powers that be. Good luck friends in the American consumer market ... you are going to need it when this sort of opportunistic type gains power in controlling internet access and services.
The article reminds all that Net Neutrality is absolutely essential for real "Freedom" not the corporate controlled monopoly of the pigopolists!
I am a little concerned about your suggestions for capping the USF. While there are indeed a lot of places where the USF is no longer really necessary, and costs *could* be borne by the market, there are still a lot of places that can't. The company I work for provides service in such an area. We supply broadband and dial-up Internet, local, long-distance and wireless telephone and lifeline services to a section of Alaska that is roughly the size of the entire state of Oregon. This is an incredibly remote area -- the only way in to a lot of these villages is either by snowmobile, dog sled (yes, for real) or airplane; there are no roads between most of these villages. In the summer, this area is a swamp; in the winter, it is wind-swept, icy wasteland. The company I work for built a terrestrial microwave network using a combination of USF funds and various federal grants so that we could bring affordable communications to the people in these villages. Even though we use a lot of open source software to run our network, it is still unbelievably expensive to provide service to these areas. In most cases, if something breaks, it's a $1K charter flight to get a repair man and equipment to the site. Because of this, our hardware has to be very, very robust. We recently lost a site because winds over 100 miles an hour knocked a microwave dish off of one of our towers in a remote area. It was several weeks before the weather relented enough to get a flight in to determine what the cause of the outage was, and then it was several more weeks before the terrestrial conditions improved enough to get a crew up the mountain to the microwave tower to effect the repairs.
My point in all of this is that it is still far too soon to place a lot of new restrictions and limitations on USF. While there are a lot of places that *can* operate competitively in an open market without government subsidies, there are still many places that can't. Even our biggest customers, the schools and health clinics that operate in our service area could not afford to pay for the service we provide if USF was no longer available to telcos like the one I work for. Please think very carefully before deciding that subsidizing rural communications carries is no longer necessary or economically efficient.
regulates communications.
I disagree that "loosening the regulatory grip" will produce more desirable
outcomes that the current regime. If anything, we need the FCC to take a more
proactive approach to encouraging competition, rather than "deregulating" so the
incumbents can collude and shut out potential new competitors.
Take Net Neutrality, which you oppose. Consider this:
1. If broadband were a competitive market, there would be no need for Net
Neutrality regulations: consumers would punish providers for obvious
discrimination by switching to a competitor. But broadband in America is not
a competitive market, nor will it be anytime soon, thanks in part to FCC
"deregulation" that abandoned the requirement that providers offer Unbundled
Network Elements ? an approach proven in other countries to foster competition.
Right now, over 96% of broadband connections in the U.S. today are thru the
cable/telco duopoly.
2. In the absence of competition, ISPs have little reason to fear a consumer
backlash for engaging in discriminatory, anticompetitive behavior.
3. ISPs have strong economic incentives to discriminate. If Comcast offers phone
service over their wires, it's in their financial interest to degrade Vonage. If
Verizon is profiting from partnerships with content producers by distributing
video, it's in their interests to degrade video being delivered by alternate vendors,
such as Vuze. And so on. Any new application that has profit potential will need
to cut the ISPs in on the profits to be allowed to flourish. It's smart business for
the ISPs, but bad for innovation.
The FCC needs to consider not just the markets they regulate, but the markets
affected by the regulation. Look what consolidation in radio has wrought ? giants
like Clear Channel bought up stations, homogenized programming, and now both
the radio and music industries are suffering. A similar "deregulatory" approach to
Internet service could have a similarly negative effect on networked applications.
Would not the same philosophy applied to communication networks, be just as viable as they are for the highway network? Absolutely!
This country could not operate without Comunication or Transportation, we provide the people (Individuals, business, and governemnt)with adequate avenues of transportation, but do nothing for comunication, there is not even a decent Emergency Broadcast System anymore.
The telcos, whether or not they compete, do create incompatibility in the market place. can you imagine what it would be like if the side of the road you drive on, was determined by what kind of car you drive?
The telcos are happy to suckle on your hard earned money and not re-invest in upgrades, and expansion, etc.
When you have a pot hole in your local road though, there is an avenue for it to be addressed. When traffic gets too much we can solve the problem many ways, instead of just telling people tuff, live with it.
The networks need to belong to the people as a whole, to be paid for and upgraded, directly by the gov. then available to all to use, at cost, no profits.
I would pay taxes for this, its a valuable, and neccessary infrastructure that we must have.
The FCC should be a standardizing body, specifying/approving formats, protocols, power spectrums, etc. such that device OEMs can simply comply to, rather than lisence for. And certainly NOT selling out americans with bandwidth auctions to the highest bidder. And NOT a babysitter, to monitor and control everything either.
There is a way to do this, a way that even the most paranoid of gov power can accept...they just need to do it.