Technology & Telecommunications Reform: Facts, Figures & Recommendations (Issues 2006)

Technology and Telecommunications

By James L. Gattuso

Ten years ago, President Bill Clinton signed the Telecommunications Act of 1996, comprehensively rewriting the nation’s communications laws, and Americans were told they soon would be enjoying vastly increased competition and innovation in communications. Today, they enjoy those benefits, although the progress has had little to do with Washington. While lobbyists and regulators debated and litigated over provisions in the act that were meant to jump-start telephone competition through new regulations and mandates, Internet and wireless technologies—both virtually ignored by the act—flourished beyond all expectations. These services have also been highly competitive, not only providing competition in Internet and wireless markets, but also creating competition for traditional wired phone service. Given this competitive environment, policymakers should focus on decreasing regulation of telecommunication services while resisting calls for new regulation.

Recommendations

Roll back remaining monopoly-era regulations where telecommunications service is competitive. Many of the rules applied to telecommunications in the era of monopoly are unnecessary and even counterproductive in today’s competitive era. For instance, regulation of the retail price of telephone service does not make sense where consumers can choose among numerous phone competitors, ranging from their cable TV providers to stand-alone Internet-based phone companies.
Avoid regulation of Internet service. As the Internet grows, pressure to impose regulations increases. Of particular concern are proposals to impose rules mandating that Internet carriers treat all transmissions equally. Known as "net neutrality" rules, such regulations are unnecessary in today’s competitive market where cable firms, telephone firms, and others could stunt investment in and growth of Internet services.
Limit local video franchising regulation. New technologies have made new competition in cable TV possible. Using existing telephone lines, firms such as AT&T and Verizon are beginning to offer television service to consumers. However, to provide nationwide service, these new competitors must be granted franchises from among some 8,000 local cable regulators around the country. The franchise requirements were written in an era of monopoly cable service and have no role in today’s competitive world. The rules should be eliminated to open the way for more competition in cable television.