Congress Starts The Telecom Act Re-Write Clock

Debate May Signal Internet Epiphany, But That's Not All

The House Energy and Commerce Subcommittee on Telecom and the Internet last week held what its chairman Rep. Fred Upton (R-Mich.) claimed would be the first in a series of such sessions to lay the foundation of congressional efforts to modernize telecom laws and to bring them up to speed with new technologies. If taken at face value, the hearings mark the start of a potential revamp or trashing of the Telecommunications Act of 1996 that tended to fixate on ensuring further voice-oriented long-distance competition and injecting more local competition against the dominant regional operating companies.

The Feb. 9 hearing's focus -- "How Internet Protocol-Enabled Services are Changing the Face of Communications: A View from Technology Companies" -- was in stark contrast with how Internet terminology is barely mentioned in the 1996 Telecom Act, as many congressman and outside observers have pointed out. A convergence of Internet-related and other services and technologies offered by multiple carriers -- in juxtaposition with highly-segmented legal guidelines for regulators -- is being cited frequently as a major reason for a need to entertain the legislative overhaul.

"It is important to get it right this time," remarked Rep. Joe Barton (R-Texas), chairman of the full House Committee on Energy and Commerce, although comments and questions by legislators continue to underscore that a central issue of how much regulation and deregulation is advisable remains highly argumentative. This is particularly apparent when principals of open, unbridled competition are weighed alongside such social imperatives as the Universal Service Fund (USF) that subsidizes telecom service for poor and rural citizens.

It is not yet clear on Capitol Hill, but movements to introduce sweeping telecom legislation could clash with more narrowly focused bills that seek to guarantee that Internet services are deregulated or others that preempt states' rights in favor of federal jurisdiction while imposing such regulatory provisos as 911 service and USF contributions. There also are reports that state legislatures are considering revamps of their own telecom and regulatory laws to be consistent with any potential federal legal initiatives.

According to Rep. Upton, "wrong-headed government" resulted in litigation, regulatory decision rewrites, uncertainty over the technology sector, and a hindering of investment and innovation. "There is a fear that government regulation will smother or choke off new technologies under red tape," he said. "We need new legislative tools to end the specter of governmentmanaged market competition."

Ranking committee member Rep. Edward Markey (D-Mass.), however, credited government policy with "opening up a digital free-for-all" and promoting broadband penetration via competition -- at least via telco and cable-TV alternatives. "We still have a two-wire world at minimum, and that's still a good regulatory framework," he said. "A duopoly is not an ideal marketplace, but we can still foster alternative entry policies. The preferred route should be competition."

Star Power: Congress' Plan May Have Backfired

The hearing featured testimony by what congressional showmanship billed as a "blockbuster panel" or an "all-star lineup" of technology industry luminaries. "Testimony of these witnesses will prove now is the time for Congress to update the telecom laws," said Upton.

The testifying group included Edward J. Zander, chairman and CEO of Motorola Inc.; Andy Mattes, president and CEO of Siemens Communications Inc.; Dr. Michael Quigley, CEO of Alcatel USA; Dr. Irwin Mark Jacobs, chairman and CEO of Qualcomm Inc.; and Patricia Russo, chairman and CEO of Lucent Corporation.

In exploring what the subcommittee said would be "their vision for the future of Internet-enabled products including video, data and Internet telephony," these company executives essentially recited the mantra of unlicensed spectrum use; user-friendly devices; communications mobility; and the convergence of next-generation networks, applications and services on IP or packet-dominated platforms. Their relatively consistent industry, and naturally parochial, message to the subcommittee was that less regulation of new services and relief from taxes on Internet services -- but improved tax incentives for R&D -- would be better for business, competition, the Internet and the U.S. economic position.

One irony in this roster is that, with the exception of Qualcomm, these manufacturing companies have been among the traditional prime suppliers to established wireline and wireless carriers; such vendors and buyers alike were virtually late to the Internet party, compared with the likes of Cisco Systems and the early Internet service providers.

Nevertheless, perhaps more germane to the congressional charter and revealing about congressional thinking were the questions and comments from legislators. These included the importance of emergency 911 services, whether regulatory parity should apply to all markets and all players, if municipal entities or quasi-official utilities should be allowed as competitors into carrier markets, consumer savings (if any) resulting from convergence and competition, unbundling of network elements among cable operators (or any nontelcos for that matter) and how other nations subsidize telecom and/or broadband penetration.

Most common, however, were remarks from several legislators regarding the USF and rural services, summed up, perhaps, by Markey saying, "We must also ensure affordable broadband reaches remote areas of the country, where competitive deployment may not occur."

Melding Telecom Act, USF Initiatives

From the subcommittee dialogue, it appears likely that Congress wants to reform USF in the context of the larger Telecom Act rewrite debate. Calls for the reform of both have been rapidly forthcoming from numerous outside quarters, including such think-tank organizations as the Progress & Freedom Foundation and the Cato Institute.

Prior to the Hill hearing, Cato and the Discovery Institute hosted a Capitol Hill session on why reform cannot wait now that nine years have passed since the Telecom Act was enacted; the basic position of the institutes is that the United States needs to bring an end to the legally confusing and economically inefficient regulatory regime the Act fostered instead of cleaning up such things.

Cato has been preaching reform for some time, with its campaign intensifying as of last year. Most recently, the group issued a report blaming telecom business troubles on the Federal Communications Commission's (FCC's) policy of competition promotion as "the real culprit" that forced network sharing and that removed incentives to develop new technology and to expand infrastructure."

Cato Senior Fellow Lawrence Gasman, president of Communications Industry Researchers Inc., argues in Who Killed Telecom? Why the Official Story Is Wrong that the FCC's "unbundling" plan removed entrepreneurial risks by allowing a surge in startups to use networks developed by established incumbent telco businesses. This effectively removed incentives for Bell companies to expand their networks (because the FCC forced telcos to share infrastructure with competition), and it also discouraged serious entrepreneurs from starting their own networks. Gasman believes such new technologies as wireless phones and voice over Internet Protocol (VoIP) may rescue the telecom industry from the 1990s regulations that killed it.

"Technological change may eventually mean that many of the most cherished assumptions of the 1996 act will follow those of the 1934 act into the dustbin of telecom history," he wrote. "In any case, no matter how telecom deregulation evolves in the early 21st century, what happened to telecom in the late 1990s remains a cautionary tale of how reforming regulation rather than truly deregulating can lead to disaster. With Congress potentially poised to re-open and revise the Telecom Act, lawmakers must learn from the mistakes of the past and ensure they do not repeat them."

[Copyright 2005 Access Intelligence, LLC. All rights reserved.]

COPYRIGHT 2005 Access Intelligence, LLC.
COPYRIGHT 2005 Gale Group