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Counting Down the Top Ten

Five years and one administration after the Telecom Act was passed, these issues are high on the agenda for 2001

March 1, 2001
By: Kathleen M.H. Wallman
America's Network

As we celebrate the fifth anniversary of the Telecommunication Act of 1996 and wait to see what impact the new Administration will have on telecommunications and technology policy over the next four years, there are ten key issues that are sure to dominate policymaking at the Federal Communications Commission during the Bush Administration under new Chairman Michael Powell. Some of these issues were debated and discussed five years ago, when the Act was first passed. Some of these issues seemed far in the future. But the amazing pace of technology and the pressures on companies to perform in the marketplace for investors and customers have pushed many of these issues to the forefront of the policy arena. The new Administration will play a critical role in determining what their impact will be in the years to come.

The Digital Divide. The new Administration is likely to give more weight to arguments that the market is working to bring advanced services to people who are of limited income or live in sparsely populated rural areas. With the new Administration, we should expect less emphasis on special regulatory programs to extend coverage of advanced and basic services to remote and underserved populations, but continuing support for traditional, mostly successful low-income programs such as Lifeline and Link-up.

Calling Long Distance. The Telecommunications Act of 1996 addressed competition not only in local markets, but long-distance markets, too. As we come upon the fifth anniversary of the Telecommunications Act, many of the long-distance companies have merged or been acquired, and many have seen their stock prices plummet. In the meantime, the Regional Bell operating companies (RBOCs) have fought hard to persuade the Federal Communications Commission that they have fulfilled their duty to open their local markets, which is a prerequisite to long-distance entry. If the RBOCs still have the appetite for long-distance entry, despite the declining revenue margins in the business, expect greater flexibility from the new Administration to let them in, and a greater willingness to let the market work out any kinks.

Powell: Must build bridges to state regulators Antitrust Issues. The FCC is required by statute to evaluate whether license transfers, including those necessary to consummate mergers, are in the public interest. Likewise, the FCC is required by statute to decide whether RBOC proposals to enter the long-distance market, once they have opened their local markets to competition, are in the public interest. The FCC's application of the standard has been criticized as slippery, and the standard itself has been criticized as not meaning much when lined up against the rigors of antitrust analysis, which the Department of Justice conducts. The new team is likely to give a lot of weight to those criticisms. Expect less reliance on the public interest test, and more deference to antitrust analysis in merger reviews and the RBOCs' Section 271 applications for permission to offer long-distance services.

E-Rate. Early Republican skepticism about the merits of executing education policy via telecom policy has faded in light of the success the program has had in meeting the specific priorities of educators. But the program does not run by itself; it still requires tactical and moral support from the FCC. The real question is whether the program is so popular now that its constituents will demand continued support for it - and whether that support will be able to overcome any ideological objections that may resurface.

Ownership Caps. The new team will be more skeptical of prophylactic limits designed to defend against accretion of market power, like the current cap on the number of homes a single cable company can serve. These will be viewed as unnecessary to replace or supplement antitrust analysis. In the area of broadcast, expect a similar relaxation of restrictive rules, but careful attention to the underlying antitrust analysis.

Regulation. The "less regulation is better" thesis embraces the idea that the economy works better with fewer rules, and clearer rules that are fairly enforced. This is consistent with a current telecom theme that the eventual emergence of competition will mean a big change in regulators' roles. In the days when AT&T controlled both the local and long-distance markets, the FCC only needed to make detailed rules to govern the behavior of one company. Now, the FCC's role has expanded many fold. There are hundreds of telecommunications companies over which the FCC has enforcement authority, and rapidly changing technologies and evolving services have created even more consumer complaints on such issues as slamming, cramming and 900 calls. So the real question is whether competition will flower quickly enough to support this thesis and whether we will see a less activist FCC.

States' Rights. There are lots of things that states might be better positioned to do than the federal government. Consumer protection might be one of those areas, and there are already some developments in that area - such as slamming. Overall, the new Administration will need to build bridges to the state regulators and legislators responsible for telecom policy. Even though it is getting harder and harder to say for sure whether a phone call is intrastate or interstate - it may or may not cross state lines, and who knows where it "terminates" - our system still maintains separate roles for the federal and state governments in making policy about telecom. The new team will find, like the old team, that it is a delicate dance to move ahead with sound federal policy without the support or acquiescence of their state counterparts. Fortunately, the new team has lots of equity built up in the notion of states rights, which should earn them some goodwill. But telecom policy often requires federal direction, and sometimes federal preemption of state prerogatives is unavoidable. The real question is whether the new Administration can build bridges sturdy enough not only to support consensus, but also to stand up to the strong, cold wind of disagreement when that time inevitably arises.

New Technologies. Expect a more proactive evaluation of where the cutting edges of the telecom economy are going. The new Administration will view the telecom market as expanding dramatically, as data and voice services are offered by myriad companies using different technologies. The RBOCs might have a high market share of local residential wireline services, but the percentage drops significantly if what is being measured instead is the market for all services that allow one neighbor to communicate with another. This perceived explosion of competition will suggest a deregulatory approach to traditional services.

Universal Service. Even those who dared to harbor a thought of expanding the Universal Service Program to subsidize advanced services knew it would be a hard sell to increase collections and add more line items to phone bills to do this. The new Administration is unlikely to expand universal service support much beyond where it is now. The new team may view it acceptable enough to do a worthy job of supporting basic services and making existing programs work well, without reaching for anything more.

Content. Some of the hardest-fought battles over the past eight years have dealt with content with respect to children and television - the V-chip, free time for political candidates and liquor advertising. Don't expect the new team to dismantle children's television rules or eliminate the V-chip initiative, but don't expect a push beyond these areas either.

The issues facing the new Administration and how they treat them will have an enormous impact on the future of telecom and technology policy. How these issues are treated will determine how corporate decisions are made and, in turn, how those decisions will impact choice and competition for consumers.

Five years ago the Telecommunications Act helped make possible enormous changes in telecommunications and technology. It is now up to the Bush Administration to ensure that the nation's economy can build on those positive changes.

Reprinted with permission from Advanstar Communications.


© 2002 Wallman Consulting, LLC