December 5, 2013

Principles for Telecommunications Act Reform

Brent Skorup

Senior Research Fellow
Summary

Congressional lawmakers are currently considering updating the Telecommunications Act of 1996. Mercatus Center research fellow Brent Skorup says that the reform effort is long overdue and discusses how to improve and modernize the United States’ telecom, broadband, and video programming laws.

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Congressional lawmakers are currently considering updating the Telecommunications Act of 1996. Mercatus Center research fellow Brent Skorup says that the reform effort is long overdue and discusses how to improve and modernize the United States’ telecom, broadband, and video programming laws.

"We need a major re-write that eliminates regulatory distortions in communications, much as airlines and transportation were deregulated in the 1970s.

There is bipartisan agreement that the 1996 Telecom Act was antiquated only shortly after President Clinton’s signature had dried on the legislation. There is also consensus that spectrum policy, still largely grounded in the 1934 communications statute, absolutely distorts today’s wireless markets. And there is frequent criticism from thought leaders, right and left, that the FCC has been, for decades, too accommodating to the firms it regulates and too beholden to the status quo.

Five key reform principles would provide a good starting point for improving the legal and regulatory climate.

  • Eliminate regulatory silos and level the playing field through deregulation;
  • Comprehensively reform spectrum, not just through more auctioning but through clear property rights;
  • Replace the FCC’s amorphous 'public interest' standard with a more clearly defined consumer welfare standard, which is more well-established in field of antitrust law;
  • Reform universal service fee programs by either converting them to vouchers or giving control to the states and let them run manage their own telecom assistance programs; and
  • Significantly reform and downsize the scope of the FCC’s power of the modern information economy.

The FCC largely sees itself as a competition agency today, but the current statutes don’t represent that gradual change in purpose. The FCC is slow, arbitrary, Balkanizes industries artificially, and attempts to regulate in areas it isn’t equipped to regulate. These characteristics create a poor environment for substantial investments in technology and communications infrastructure. We need a framework that minimizes the effect of special interests in communications and encourages investments that improve consumers’ lives."