But a larger and more important issue remains overlooked: the 18-year-old U.S. Telecommunications Act. Given the immense change that has occurred in that time, coupled with momentum among policymakers to overhaul the law, this should be the focus of our attention. And as a European telecom economist, my advice is simple: forego a drastic regulatory regime and ensure one that recognizes the inherently competitive communications landscape of today.
As Winston Churchill once said, “If you make ten thousand regulations you destroy all respect for the law.”
The law that governs America’s communications networks was designed in a very different world in 1934. Despite some amendments, the last comprehensive overhaul took place in 1996. The rewrite removed many unnecessary regularly hurdles, allowing the Internet to boom, but 18 years is a significant amount of time in the communications industry, and now we are left with a so-called “silo” regime whereby varying regulatory burdens are unwisely applied to different types of technologies that offer similar services.
Convergence in the Internet ecosystem has opened the market to new players for network access, content, applications and devices. In doing so, it has rendered the siloed nature of the 1934 Communications Act intractable and unworkable.
For instance, consumers now have the choice between several network operators, different network access technologies (whether fixed, wireless, or Wi-Fi), a dizzying array of devices, and a plethora of content and applications. Consider the proliferation of smartphones. Consumers are increasingly using non-voice services on their smartphones like text messages, e-mails, and messaging through social media apps. To a large extent, all of these technologies can act as substitutes or a complements.
Federal Communications Commission Chairman Tom Wheeler seems to agree, recently stating, “all of us have observed the growing convergence of previously separate and distinct communications services and with it, inevitably, the growing obsolescence of the Communications Act's categories.”
The transition from a single-sided market (telecommunications providers and consumers) to a multi-sided market (broadband providers, consumers, content providers, applications and devices) lies at the heart of this convergence. The market today is characterized both by competition and cooperation, also called co-opetition – highlighting both differences and interdependencies between technologies.
As such, American policymakers should adopt a regulatory approach that treats these technologies equally across all sectors and relies on the existing, robust antitrust protections in the U.S.
Legislators should embrace a consensus approach to creating a legal and regulatory environment that fosters innovation and competition while promoting consumer choice, similar to Wheeler’s proposed framework for an open Internet. Unlike European regulators who recently adopted net neutrality rules that could potentially ignore the realities and demands of modern communications services, Wheeler’s approach recognizes the long-standing use of mutually-beneficial agreements between ISPs and content providers – a two-sided market – to better meet consumer needs.
Indeed, the heavy-handed regulatory model adopted by the European Union is a parable for what the U.S. should not do regarding broadband regulation. Europe’s shortsighted insistence on unbundling regulation that essentially sets a regulated price for access to a network and other policies have probably contributed to scaring off critical investments in network infrastructure that are the precursors to improved services and newer technologies. One need not look further for evidence than the figures that show per capita investment in broadband networks in the EU is less than half of that in the U.S. Or for that matter, the fact that 96 percent of Americans have access to superfast LTE wireless networks, demonstrably outpacing the 26 percent of Europeans who have that kind of access.
American officials would be wise to learn from Europe’s mistakes.Edmond Baranes is a professor of economics at the University of Montpellier in France, and this year filed a submission to Congress' Communications Act review. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions for editorials, available at this link.