The Telecommunications Act of 1996 is not working. Designed to promote competition in cable and phone markets, it is instead being used to cement monopoly. It now is clear that campaign contributions to powerful legislators by competing interests produced deliberately obscure legal language. The result: paralysis in the courts. And attempts to balance different consumer and producer interests begat stifling compromises that worked only to block change. It's time for Senate Commerce Committee Chairman John McCain (R-Ariz.) to cut the Gordian knot. Partial deregulation is, in the end, an oxymoron.
What's needed is a true opening of all communication markets at once and a free-for-all fight among the competitors. That means ending laws and regulations that protect different constituencies in the communications business. Direct-broadcast satellite providers, for example, cannot offer local news and sports because of federal copyright laws. EchoStar Communications Corp. is meeting fierce resistance from cable and broadcast rivals, who contend that satellite-TV carriers can beam local programming only to households that can't get cable or broadcast television.
Well, if cable can carry local programming--and under the "must carry" provision it is required to do so--why not DBS? Some 40 million people have gone into stores to ask about satellite TV, only to be told they can't get local stations. Is it any wonder that only about 7 million, half in rural areas, have signed up? The strongest rival to cable and broadcast TV can't play on a level field because of copyright law.
The communications industry is defined by suffocating laws, regulations, and deals that block competition. During negotiations for the Telecom Act of 1996, the Bells made promises about entering local cable markets to provide competition and lower prices to consumers. In exchange, they wanted to be free to enter into lucrative long-distance phone service dominated by AT&T and MCI Communications Corp. Congress agreed, but only if the Bells opened up their own local phone monopolies. In the end, nothing happened. The Bells chose to fight in the courts to retain their turf. They ignored the cable market. And they lobbied regulators to elbow into long-distance without giving up anything. Net net, all monopolies were preserved, legislative intent notwithstanding.
Meanwhile, cable prices are rising at four times the rate of inflation, and consumers feel exploited. Cable companies say they must charge more for programming, yet many own the very same programs. They say customers are getting more channels, yet customers must pay whether they want them or not. It goes on and on. McCain should deliver a cleansing stroke that frees up all communications markets. Market forces may not always operate with complete efficiency, but only Washington could create the monstrous snarl we now have.