The battle in Congress over telecom reform is over, with the Feb. 8 signing of the Telecommunications Act of 1996. But the war over the final shape of telecom reform has just begun.
Exhausted after years of wrangling, Congress, the Clinton Administration, and the warring industry factions agreed to let the Federal Communications Commission decide the most complicated and contentious issues, such as how and when local carriers can offer long-distance service in their regions. The telecom reform bill, a 40,000-word behemoth, refers to the "Commission," meaning the FCC, more than 360 times. The FCC has itself published a list of 100 new regulations it needs to issue over the next 18 months, covering subjects ranging from universal service subsidies to the rules governing attachments to telephone poles.
During this regulatory fast break, the FCC should follow a simple principle: Maximum deregulation, as soon as possible. The key is competition. The FCC should write regulations that will open up markets quickly, and allow competition to handle the problem of keeping the large phone and cable companies in line.
The FCC shouldn't worry too much about making mistakes. That may seem like a heretical notion, but this is one situation where the best is the enemy of the good. Telephone and cable companies have been holding off making critical investment decisions, in part waiting to see what the rules of the game are going to be. Rather than duplicating what Congress did and holding long, extended hearings, the FCC should pump out its decisions as quickly as possible. At the same time, the phone and cable companies shouldn't endlessly lobby the commission, which could bog down the deregulation process. What's important is to set the ground rules for the telecom industry--right now.
It will be tempting for the FCC's regulators to micromanage the vast changes in the telecom markets by setting detailed rules for "fair" competition. But that would be a mistake. Options that seemed likely only a few years ago--interactive television, movies-on-demand--now seem much further in the future. Other alternatives, such as the Internet, have sprung into prominence unexpectedly. Similarly, at the current rate of technological change, there's no way to know whether low-cost universal service to rural areas and poor urban areas is best provided by copper wires, as it is today, or by some form of wireless service. That means the FCC should set up as simple and transparent a subsidy system as possible, so it can be adjusted as the technology advances.
It's clear that the FCC has been handed a difficult problem, one that Congress was not able to resolve. Here is a chance for regulators, so often maligned, to show everyone what they can do.