October 27, 2004
Telecom
Regulatory Shortcomings Hurt U.S. Economy, Expert Says
by Drew Clark
The United States' failure to craft an intelligent approach to telecommunications regulation is jeopardizing the country's technological and economic leadership, an economist who helped craft a major telecom study said Wednesday.
"Telecom is the central nervous system [of the economy] and is just too important to be looked at as a regulated industry," said John Rutledge, chairman of the economic advisory firm Rutledge Research. "It needs to be the core of a national economic policy for growth." One of three authors of a telecom study this month by the U.S. Chamber of Commerce, he was the keynote speaker at a conference sponsored by the New Millennium Research Council.
Rutledge said high-speed global telecom networks have made capital and education transportable from country to county. That reality cuts against the United States when jobs are moved to other countries but benefits Americans when local economies treat capital investments well, he said.
He cited his own experience as the part-time owner of a small company in Memphis, Tenn., that manufactures picture frames. The woeful state of broadband in neighboring Mississippi meant that "Memphis cannot talk with a factory 70 miles south as easily as we can talk with a vendor in China," Rutledge said.
He said Mississippi's U.S. senators were "interested and a little surprised" by that reality. "In this environment, the way to bring business in is to make your location a destination for capital," particularly through policies that encourage broadband deployment, he said.
The chamber study largely endorsed the deregulatory position pushed by regional Bell telecom companies, which seeks to eliminate rules imposed on telecom companies that could benefit competitors. The study also urged pre-emption of any state role in regulating Internet telephone traffic.
Rutledge predicted that a successful American telecom policy would flip the role of public-utility commissions "from traffic cop to economic development agency to entertain tourists bringing the capital in."
Most of the members of a subsequent panel at the conference endorsed the need for pre-emption, and many discussed their hopes for sweeping structural changes to the FCC.
Brandon Cox, technology counsel with the Competitive Enterprise Institute, displayed a modified FCC organization chart that would eliminate several bureaus or transfer their jurisdiction to the FTC or Justice Department. "An once of pre-emption and non-duplication [of FCC functions] equals a pound of deregulatory cure," he said.
Missouri Public Service Commissioner Connie Murray said, "The FCC should be restructured similar to the FTC, or the duties could be taken by the FTC," to ensure there is no deception or unfair trade acts. "This shift would no doubt reduce the size" of the FCC.
Former agency Commissioner Harold Furchtgott-Roth said he is wary about pre-empting state telecom regulation. And Chris Libertelli, a senior legal adviser to FCC Chairman Michael Powell, said Powell has sensibly restructured the agency.
Adam Thierer, director of telecom studies for the Cato Institute, said the debate over FCC processes or commissioners is a distraction from ensuring that Congress sets good policies and limits the agency's power.
Political Factors Complicate Telecom Debate, Experts Say
by Drew Clark
Current telecommunications laws are at the breaking point, but the politics surrounding the current structure complicates reform efforts, panelists discussing telecom regulation agreed Wednesday.
The panelists generally agreed on the need to deregulate many current telecom rules and to pre-empt states from much regulation, particularly economic regulation of new communications-based technologies. The event was hosted by the New Millennium Research Council, which is supported by regional Bell telephone companies.
Members of the first panel debated whether telecom laws need to be comprehensively rewritten or whether smaller changes would suffice.
"It is a mad, mad telecommunication world out there," said Randy May, senior fellow at the Progress and Freedom Foundation. "We obviously need to change our regulatory model. The current model needs to be eliminated" because such rules "don't make sense in a digital world."
Jeff Carlisle, chief of the FCC's Wireline Bureau, said telecom regulation is most suited to the dominant Bell companies with prices that are set by the government. New technologies and competition have changed that world, he said, yet "all sorts of policies are basically artifacts of the fact that telecom consisted of huge companies [and] you knew where to go to get their money" to cross-subsidize other services.
Several panelists said they believe targeted reforms by Congress or the FCC could meet the challenge that new technologies pose for telecom policy. "The traditional model for the circuit-switched network is one that the FCC has already decided it doesn't want to go down," said Mathew Brill, senior legal adviser to agency Commissioner Kathleen Abernathy.
David Peyton, director of technology policy for the National Association of Manufacturers (NAM), praised the FCC for a series of recent decisions clarifying that Bell companies do not need to share access to their fiber networks. The last such decision came Friday, when the FCC approved a petition by Verizon Communications declaring that the agency would not use one section of the telecom law to override liberalizations made under another section.
Previously, "FCC rules discouraged firms [from] making discretionary investments in last-mile broadband," Peyton said. He said NAM's support for the High-Tech Broadband Coalition is aimed at driving more high-speed Internet access for businesses.
He also praised FCC Chairman Michael Powell's "four freedoms," a set of self-regulatory principles designed to ensure that cable companies do not attempt to steer Internet traffic toward cable-owned Web sites. "Chairman Powell's four freedoms mirror what the [coalition] has been saying," Peyton said, and added that he wants cable operators to join Bells in agreeing to them.
Susan Kennedy, a member of the California Public Utilities Commission, said the FCC should draw a firm line against regulation of "information services," and she praised a proposal dubbed the "layers model" that she said would help guarantee that.
May disagreed with that model, which is advocated by MCI. "It is not a good public policy framework and just confuses the issue" by substituting one regulatory framework for another, he said.
