Communication Cleanup
A freedom of information act
The cost of processing and conveying information will consume a steadily growing fraction of every budget, private and public, for the rest of our lives, and quite possibly for the rest of American history. Manufacturing, transportation, energy, finance, education, medical care—the prosperity of almost every sector of the economy will hinge on telecommunications and information processing. Growing the information economy will be as critical to our national wealth as maintaining a stable currency. In fact, currency itself—which is no more than a primitive medium of communication—is fast giving way to newer, more private forms of data bases and electronic communication. Reed Hundt, chairman of the FCC, may be as important to our future as Alan Greenspan. All this means that getting telecom policy right is transcendently important.
But what's right? Telecom jurisdiction today is divided higgledy-piggledy among the Federal Communications Commission and countless state regulators. The Department of Justice and Judge Harold Greene, who still police the 1984 decree that broke up Bell, have a large and independent slice of the legal action. These various regulators and litigators oversee interstate telephony and all of broadcast under laws written in 1927 and 1934, and a consent decree drafted in 1982. Cable is regulated under a pair of rubbishy statutes enacted hastily, and almost thoughtlessly, in 1984 and 1992. Satellite is regulated mostly by analogy to telephone and television. The copyright law most relevant to broadband telecom was cobbled together in a truly abominable piece of legislation passed in 1976.
The last Congress tried to fix the mess. It failed. In a classic exhibition of Washington at its overstaffed, overlobbied, constipated worst, proposals to deregulate gradually metamorphosed into proposals to regulate more than ever. Then they died merciful deaths. This was nothing new. Congress has been trying to pass a comprehensive new telecom law since 1981.
The Republicans are now promising action by Easter. They might consider this modest proposal (I don't really expect they will—this is a thought experiment): Write a new law that addresses only government, no one else. No new studies, rules, tariffs, or schedules. No new mandates, proscriptions, tribunals, boards, or commissions. A law, in short, that simply clears away an obsolete underbrush of law itself. It's what the industry most urgently needs.
Entry. Monopoly is indeed a nasty thing. The biggest monopoly in town is always government. Franchise rules and entry regulation shore up existing monopolies. To fix monopoly, you have to go after and disable the worst monopolist, government itself. So…
Repeal the federal law that forbids phone companies from providing video services. Repeal the same law that (arguably) forbids cable companies from providing phone service. Preempt any state regulation to the contrary.
Authorize ATT, MCI, and any other interstate carrier or broadcaster to deploy in-state wireline or wireless networks. Preempt any contrary state regulation.
Repeal all existing rules that stop broadcasters from building or buying cable, or cable from entering broadcast, telephone from entering either, or any of the above from going into print or other media. Eliminate all rules that limit the aggregation of radio stations, broadcast stations, or cable properties. Eliminate all rules that restrict vertical combinations of media companies and content providers, like movie theaters and Hollywood studios. Leave in place only the antitrust laws—which can be applied firmly, case by case, based on up-to-date evaluations of what really would impede competition under current conditions in the rapidly converging telecom markets.
Preempt all state laws that forbid or cripple deployment of Satellite Master Antenna Television services (SMATV, or private cable) or Shared Tenant Services (private telephone exchanges). Eliminate all state and federal excise taxes, surcharges, or franchise fees imposed specifically on private or public carriers, broadcasters, or electronic publishers. These almost always represent attempts by government itself to cash in on monopoly rents.
Eliminate all restrictions on foreign ownership of U.S. telecom facilities. The one qualification might be to let U.S. trade negotiators keep the ones they specifically need as bargaining chips in negotiating for the elimination of telecom trade barriers.
Radio Licenses. Regulation of the wireless telecosm stands as an antiquated, statist ruin of the New Deal. Nobody but the federal government owns spectrum. Nobody but the FCC may decide how to use it. Nobody may sell, borrow, or lease, without the commission's say so. Moscow never exercised any powers more sweeping or inefficient than our very own Politburo on the Potomac. So…
Sell all new radio licenses at auction to the highest bidder. Sell off all existing spectrum under FCC control as soon as possible. Transfer large slabs of underused spectrum from other federal agencies (including the Pentagon) to the FCC. Then sell them off. When outstanding licenses expire, sell that spectrum too. Incumbent broadcasters will howl at the thought. Let them howl.
Authorize any owner of a radio license to sell it to anyone else. Repeal all FCC rules that prescribe how spectrum is to be used for broadcast, common carriage, or private purposes. Let broadcasters transmit data and paging. Let TV stations close shop on a Friday and reopen on Monday as wireless phone companies. Let taxi dispatchers go into interactive television.
Authorize all licensees to invoke common-law principles of trespass and nuisance in state or federal court to protect property interests in spectrum. In resolving disputes about interference, favor private suits over FCC regulation. The FCC can remain the last-resort regulator to ensure that transmitters operate at authorized frequencies, powers, and locations.
Broadcasters and Carriers. Both federal and state regulators doggedly struggle to maintain pristine lines between broadcasters and carriers. A well-defined law of common carriage remains useful—carriers take on special duties (non-discrimination) but get special privileges in return (wide immunity from defamation and copyright laws, for example). Outside the traditional realm of common carriage, however, bright lines aren't needed, and just create needless complication. So…
Authorize any common carrier to transmit anyone's content, including its own. Leave copyright laws in place. Authorize any broadcaster to carry anyone's content, not just its own. Legalize "time brokering," under which broadcasters sell air time in small increments to willing buyers.
Let broadcasters refuse to broadcast whatever they don't like, including political messages. Let cable companies refuse to transport whatever they don't like, including broadcast channels. Abolish the abominable Copyright Royalty Tribunal and all the compulsory license laws it administers. Place cable companies under traditional copyright laws once again. If they want to retransmit anyone else's transmissions, make them buy them in the open market.
Prices. Large parts of the telecosm are already competitive today, or will be very soon. Price regulation here is a destructive anachronism. So…
Abolish all remaining price regulation of wireless services (there isn't much left anyway). Abolish all price regulation of interstate wireline services, like ATT's and MCI's (there isn't much left there, either). Whether or not the long-distance market is adequately competitive, regulation no longer does any visible good. Outlaw the filing of tariffs for any of these services. The tariffs in these markets just facilitate price fixing.
Abolish all price regulation of video services, whether supplied by cable, telephone, direct broadcast satellite, SMATV, VCR, disk, or other technology. Outlaw the filing of tariffs for these services, too.
Authorize every common carrier to meet or beat prices offered by competitors, even if that results in what would otherwise be an (unlawful) "discriminatory" price.
Universal Service. When all else fails, this is always the last-ditch excuse for regulating what should be let alone. So…
Abolish all state and federal laws that impose service obligations on new and nondominant entrants into any market. Promote universal telecom service the same way we promote universal hamburgers: by open entry and free competition.
Free Speech. Abolish any law that passes First Amendment muster only on the theory that airwaves are somehow "scarcer" than print, or that wires are "natural monopolies," or that electronic media are inherently different and less deserving of protection. The only real scarcity in the business is a creation of government itself. The answer to government scarcity is market plenty.
Peter Huber is a senior fellow of the Manhattan Institute, a columnist for Forbes, and serves Of Counsel to Kellogg, Huber, Hansen & Todd. He is the author, most recently, of Orwell's Revenge: The 1984 Palimpsest(Free Press). He has done legal work and market research for regional Bell companies and other providers of telecom services.
