Communications without Commissions

Full Document Available in PDF

U.S. communications is at an important inflection point. Cable, telephone, and wireless companies aim to compete against each other using the latest technologies. Our current laws, however, hinder this new competition and create legal distinctions at odds with market developments.

Communications policy must acknowledge that competition between technologies is a key ingredient not just for competition, but for promoting a national broadband policy. The best way to create a fertile environment for achieving President Bush’s goal of universal broadband access by 2007 is through a series of deregulatory legislative initiatives. Communications regulation deserves more than a mere “update”—largely, it must be phased out.

The removal of government regulation—deregulation—does not mean that the industry is unregulated. Competition, or even the threat of competition, regulates the behaviors of companies in efficient and consumer-enhancing ways. In communications, competition exists among an increasing number of platforms.

Technological substitution—when providers compete with different technologies to supply the same service—is revolutionizing the telecommunications industry. Cable companies are now in the business of providing local phone service. Wireless phones have effectively replaced wireline telephones for long distance calls. Satellite competes against cable for consumers of video programming, and phone companies are rapidly developing a video offering that will compete against both satellite and cable.

Congress must consider these broad market developments and act in tailored ways that change communications law and reforms the agency that administers it. First, it should establish clear boundaries as to whether an area of communications should be regulated by federal or state governments. Additionally, Congress must restrict the role of the FCC in future communications regulation.

Moreover, a next generation communications policy must distinguish economic regulation from social welfare initiatives. Congress should eliminate rules that regulate market performance and focus on ways to implement social policy—such as universal service—in ways that do not require FCC oversight. Finally, Congress should restructure the FCC and provide a legislative mandate to increase the market’s role in managing spectrum rights. The FCC of the future (if it is to exist at all) should be limited to applying general unfair competition rules similar to that of the Federal Trade Commission.

The following analytical framework is a reform agenda for Congress. Whether proposed legislation tackles each separately or comprehensively, Congress must:

(1) Set regulatory boundaries

• Preemption – Analyze which governmental authority—federal or state—is best suited for the role of regulator (if government regulation is required).
• Prevention – Restrict the FCC’s jurisdiction by creating a “firewall” that would prevent it from regulating Internet Protocol-based services.

(2) Revisit rationales for economic and social policy regulation

• Eliminate Economic Regulation – Rules that regulate prices and access need to be phased out entirely.
• Divest Social Policy – Social goals should be disentangled from industry-specific taxes, price controls, technological mandates and other economic regulations.

(3) Reform the Federal Communications Commission

• Restructure – Eliminate FCC functions that could be done by other agencies.
• Reform Spectrum – Provide the FCC with a clear mandate to get spectrum into the market.

Policymakers should view lightly regulated Internet communications as a baseline and move legacy communications toward it through deregulatory parity. Congress cannot perpetuate and generate new rationalizations for oversight. Communications without a Federal Communications Commission offer real benefits to consumers. Congress should address ways to reduce the size of the FCC and the scope of its regulatory agenda—the future of communications literally depends on it.