August 12, 2005

August 12, 2005 | Commentary on Internet And Technology

Waiting for the Telecom Godot

If you liked "Waiting for Godot," you've probably loved this year's congressional telecom reform drama. Much like the characters in the Samuel Beckett play -- who keep audiences waiting for the appearance of the apparently important, but ill-defined title character -- Congress kept us waiting most of this year for telecom legislation to come on stage.

At the end of July, just before the August recess, the first telecom Godot finally arrived -- a comprehensive reform bill by Sen. John Ensign, R-Nev. The legislation takes a hefty whack at outdated telecom rules. But this play is far from over: opposition may be strong, and several more proposals are waiting in the wings.

Talk of a major rewrite of telecommunications began last year, in the wake of technological sea changes such as the rise of Internet telephony. This led to an erosion of the old distinctions between telecommunications services such as cable and telephony.

At the same time, structural changes in the industry raised hopes for quick adoption of reform. Since the 1984 Bell system breakup, telecommunications was engaged in a kind of industrial civil war between the regional Bell companies and the long-distance firms, with each side determined to get into the others' turf.

That civil war is now over. Early this year, the telecom Appomattox came, with MCI and AT&T agreeing to be acquired by Verizon and SBC, respectively. With the telecom sector no longer so polarized, the time seemed right to clean out obsolete telecom rules.

But, despite confident New Year's predictions that legislation would be moving by spring, the flowers came and went with no comprehensive reform bill even being introduced. A variety of things -- ranging from the appointment of a new Federal Communications Commission chairman to the review of the MCI and AT&T acquisitions -- conspired to delay action.

Finally, Godot came in the form of Ensign's "Broadband Investment and Consumer Choice Act."

Significantly, the legislation would not only replace the '96 act, but the underlying 1934 Communications Act (with some exceptions).

The legislation is keyed to two distinctions -- one that is eliminated, and one created. The distinction between types of communications providers is largely eliminated. Cable firms, telephone companies and wireless firms would for the most part be treated under the same set of rules. The distinction the bill creates is between "basic" -- i.e. plain old voice -- telephone service, and advanced services, such as broadband.

Basic service would remain regulated -- with rates capped, and providers prohibited from diminishing service in any way. Other services, however, would be largely freed from regulation.

Among other significant provisions:

Blocking of content -- such as VoIP service -- by broadband providers is barred. The current duty of communications providers to interconnect remains, but disputes are to be resolved through a case-by-case complaint process, rather than through detailed rulemaking by the FCC. "Unbundling" rules that required the forced leasing of parts of a firm's network to competitors are scaled back to cover the local loop which connects to customers.
In addition, the bill cuts back the state role in communications regulation -- prohibiting state and local governments from regulating the rates or service of telephone providers, except where specifically permitted to do so. In addition, it eliminates the local franchising requirement for video -- permitting telecom firms and others to offer TV service without undergoing a gauntlet of local approvals.

Lastly, the bill would place strict limits on local governments that want to build their own communications services in lieu of private providers.

The proposal is not perfect by any means -- it's already been criticized by one VoIP provider for imposing new regulations on these upstart services. And there's legitimate concern that its raft of new terms and categories could lead to a bog of litigation.

Despite the flaws, however, it's a big step in the right direction.

Early reaction to the plan, moreover, has so far been surprisingly positive. As expected, incumbent telcos weighed in swiftly with glowing praise. But Kyl McSlarrow, head of the National Cable Telecommunications Association also signaled openness -- commending Ensign for his proposal.

This comity, however, is unlikely to last. Cable has fought hard against letting telcos provide video, and the proposed new broadband rules would actually increase regulation of cable modems. The question is how hard cable will fight. And if the battle leads to a re-polarization of the communications industry, the reform show may end early.

Cable's not the only problem Ensign faces. Municipalities and states are unlikely to surrender their turf without a fight. And Senate Commerce Committee chair Ted Stevens, R-Alaska, may yet put forward his own plan. His primary interest is ensuring support for rural carriers, rather than deregulation -- not a good sign. Then there's the House -- which is putting together its own reform plan. It is likely to be deregulatory in nature, but has yet to be unveiled.

So, while the appearance of Ensign's Godot into the telecom drama is a welcome plot development, this play is nowhere near ending. It certainly will be extended another congressional season. Reserve your seats now.

James Gattuso is a research fellow in regulatory policy at TheĀ  Heritage Foundation, a Washington-based public policy research institute.

About the Author

James L. Gattuso Senior Research Fellow in Regulatory Policy
Thomas A. Roe Institute for Economic Policy Studies

Related Issues: Internet And Technology

First appeared on Tech Central Station