For those interested in telecom policy, I have some recommended reading for you. Free Press (the best media reform public interest organization in the country) has just released a comprehensive white paper on national broadband policy (pdf here). It’s the single best summary I’ve seen of the history and failures of deregulatory telecom policy. And it lays out where we should go from here.
It’s essentially a short book – but it strikes a good balance between informing the general public and addressing wonks. It’s worth checking out.
One theme that emerges is the enormous opportunity costs we incurred because George Bush was elected. The years 2000-2005 were a formative period for broadband policy – and it’s an unfortunate accident of history that the FCC and the DC Circuit happened to be controlled by Republican industry hacks at the time.
One example of these mistakes is how the government completely ignored the pro-competitive spirit of the 1996 Telecommunications Act after broadband emerged for real in the late 90s.
One purpose of the 1996 Act was to introduce competition into the local phone markets that had traditionally been controlled by legacy monopoly providers. The 1996 Act attempted to achieve this goal by forcing the incumbents to “open” their networks to competitors through various measures such as line sharing or reselling or unbundling (the basic idea is that incumbents who controlled the “interstate highways” had to provide new competitors access to those “highways” to provide service).
The justification for opening the networks was that the incumbents’ networks had been publicly subsidized for decades and that there were numerous barriers to entry (e.g., it was economically irrational to build an entirely new physical network).
And for a while, it worked. Lots of new competitors entered and prices started going down. Critically, this new competition was premised upon foundational regulation (oogedy-boogedy) that guaranteed open access, nondiscrimination, etc.
But in the late 90s, broadband started hitting the prime time. Cable companies increasingly offered high-speed connections, and phone companies soon followed with DSL.
From a policy perspective, it made perfect sense to apply the 1996 Act’s “open” framework to broadband. But that’s not what happened. To make a long story short, the DC Circuit and the Bush FCC combined to deregulate broadband access – to treat as something completely different than the traditional phone service regulated by the 1996 Act.
Rather than “opening” broadband, government “closed” it. For that reason, most of you have broadband either from your cable company or your phone company – gone are the days of dial-up where dozens of Internet providers competed for your business.
As a result, our national broadband sucks on any metric you care to pick (speed, value, price) – particularly compared to other advanced economies. Interestingly, the Free Press report explains that countries that adopted “openness” regulations (like the kind the 1996 Act envisioned) are kicking our butts in broadband. Indeed, most of them passed us up between 2000 and 2007.
What’s maddening – policy-wise – is that there was simply no justification for treating broadband regulation differently than traditional phone service. Just like phone service, broadband was provided over traditional legacy networks that were impossible for the private market to recreate. The very same logic that required the phone networks to be “opened” should have required broadband networks to be opened too.
So it was a combination of bad policy and bad luck. Unfortunately, broadband hit the big time a few years after 1996. And soon after it did, we elected an administration that was blindly pro-industry.
The rest, as they say, is history.