Why are the courts making such a mess of the Telecommunications Act of 1996? Former FCC chair Reed Hundt was hoping you'd ask.
__ Since leaving his post as chair of the Federal Communications Commission last November, Reed Hundt has been chipping away at his telecom memoir, You Say You Want a Revolution, and - big surprise - working as a policy consultant. His unofficial status allows Hundt, never shy with reporters, to be more outspoken than ever - especially on the subject of the FCC's efforts to deregulate the telecom industry, as required under the Telecommunications Act of 1996. Several US courts have rejected the implementation rules drawn up during Hundt's tenure, and the Supreme Court plans to hear the first of these cases in the fall. Who's to blame for the legal roadblocks? Wired asked Hundt to name names.
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Wired: Before you left the FCC, you warned that the Telecommunications Act of 1996 was likely to face rough going in the courts.
Hundt: I said that Congress should consolidate all the judicial reviews into a single court, and they didn't. That would have shaved two years off the judicial process. Now it's like a bunch of shortsighted people grabbing different parts of an elephant and saying, "I've got the most important part." The elephant, of course, is the local communications monopoly that needs to be broken down. This is one area where you absolutely need a national policy, but we are being condemned by Congress and the courts to balkanize telecom deregulation. It's a sad mistake.
From a consumer standpoint, what's the upshot?
It's been mixed. Consumers have seen greater competition in long distance phone service, and that has lowered costs. But the courts have slowed down the deployment of broadband services to the home and discouraged competition in markets for local phone service.
What's the FCC to do in the meantime?
The FCC should scour the books to deregulate every form of value-added service in telecommunications - that's another way to stimulate competition. Second, the FCC ought to get on its soapbox and encourage the states to create a vanilla-grade basic telephone service at a low price, while otherwise deregulating like crazy. Third, the FCC should make it very clear that universal-service funds (used to subsidize low-income and rural phone service) should not be awarded to large, local telephone companies that do not open their markets to competition. They don't need the money.
Do you see the Baby Bells as the biggest impediment to realizing the goals of the Telecom Act?
I don't blame the Baby Bells for appealing the regulations - it's in their business interests to do so. The problem lies in the states. People assume that the FCC has the power to regulate all telecommunications, but that's not the way it works - the states handle 95 percent of the regulation that applies to local phone service. The Baby Bells are big, and they're very good at operating in regulated environments.
It seems there is a tension in the original legislation between the desire to create a national telecom reform policy and the desire to allow power to devolve to the states.
That's right. Devolution of power to the states is a good idea in many areas, but not in the communications sector. Nobody wants each state setting up its own rules as you're trying to build a broadband national data highway.
Critics in Congress argue that the implementation problems stem from your overreaching efforts to impose a national policy. And, so far, the courts have confirmed that view.
Look, it's the right policy. You simply have to say what is the right thing to do. It's great if you get a court of appeals that agrees with you. If not, then you go to the Supreme Court.
But did you deviate from the dictates of the law?
No! Not at all! The FCC's job was to interpret the law in the best possible way. Our policy is the same one outlined in a brief endorsed by Senate majority leader Trent Lott (R-Mississippi). It is not indicative of a radical or aberrant view. In the end we had unanimous votes within the FCC among both Republicans and Democrats on every single interpretation of the law, and we wrote a coherent policy that gave real meaning to the statute.
Then are the fundamental assumptions of the Telecommunications Act flawed?
The fact that it has generated so much investment in communications is a testament to the basic wisdom of the competition idea. There's no doubt that this was the right thing. There are billions of dollars of investment money committed to everything from xDSL technologies, to advanced wireless, to local-area networks and satellites. The merger of AT&T and Teleport Communications Group has been a good development. So is the merger between WorldCom and MCI. We've got Intel and Microsoft backing new communications ventures with cable companies. Plus we've seen the emergence of new, guerrilla telecommunications players.
So why does it seem that hope for meaningful telecommunications reform is doomed?
The building of a national data network in the US is inevitable. The only problem is that right now it seems impossible. The courts need to understand that they are holding in their hands the fortunes of billions of dollars in investment, hundreds of entrepreneurial firms, thousands of new jobs, and the future of the information revolution. They don't necessarily appreciate that, because it's not presented to them. What's presented instead is that telephone companies are feeling anxious, and that the states are resisting federal regulation. But these points don't get to the core of the issue for the country as a whole. The real question is, Will this entrepreneur-led revolution be delayed to the point where it is damaged?
Any predictions on how the Supreme Court will rule in the upcoming case?
It's really tough. There's a strong group in the Supreme Court that is focused on states' rights. On the other hand, it makes no sense to interpret this statute as a federal mandate that 50 states should do 50 different things. Fundamentally, you have to hope that logic triumphs over ideological predilection.
