TechKnowledge No. 36

Conflict of Broadband Visions: Breaux-Nickles vs. Hollings

By Adam D. Thierer
May 10, 2002

In his masterful 1987 book, A Conflict of Visions: Ideological Origins of Political Struggles, prolific Hoover Institution scholar Thomas Sowell provided a cogent analysis of the warring philosophical paradigms that have dominated history. Sowell contrasts two major visions, which he labels “constrained” and “unconstrained” interpretations of the nature of man, law, justice, ethics, economics, and politics. Those adhering to what he calls the “constrained vision” believe in the inherent limitations of men and nature, the importance of sound legal and economic incentives, justice as equal opportunity before the law, and simple process-oriented legal rules, and see government generally as a threat to markets and liberty. By contrast, followers of the “unconstrained vision” believe in the fundamental perfectibility of humans and society, good intentions before good incentives, justice as equality of outcomes, complex result-oriented legal rules, and government as a benevolent director of markets and men to achieve a perfect society.

Sowell’s philosophical paradigms provide an excellent way to analyze the heated ongoing battles over telecommunications regulation and broadband policy. The war between the constrained and unconstrained visions is currently on full display in the Senate as competing bills embody radically opposing visions of the way the broadband marketplace should be governed.

Senators John Breaux (D-La.) and Don Nickles (R-Okla.) recently introduced S. 2430, The Broadband Regulatory Parity Act of 2002, which attempts to spur the deployment of high-speed Internet networks by requiring that the Federal Communications Commission ensure regulatory parity among the various providers of broadband services. Currently, cable and satellite companies provide broadband services to the public without fear of burdensome FCC infrastructure-sharing mandates. Regional Bell Operating Companies (“Baby Bells”), however, face many network interconnection and access mandates on their voice networks that might be applied to their broadband offerings. If such regulations were imposed, the Bells would have less incentive to deploy expensive and complex new high-speed networks, especially in less densely populated areas.

Acknowledging the deployment disincentive created by such infrastructure-sharing mandates, and understanding the importance of simple legal rules that guarantee equal treatment before the law, the Breaux-Nickles measure proposes the equivalent of a “Most Favored Nation” clause for telecom policy. MFN, a key element of trade policy law and negotiations, stipulates that trading partners accord the same treatment to each other that they would offer to their most favored trading partner. MFN has been a crucial part of ongoing efforts to liberalize trade globally since it guarantees that governments treat similar goods in similar ways and does so by lowering tariffs and trade barriers.

The Breaux-Nickles bill effectuates the same end for the domestic telecom policy and does so by demanding that the FCC achieve broadband parity not by “regulating up” to put carriers on equal footing, but rather by “deregulating down.” The bill states that “all providers of broadband service, and all providers of broadband access services, are subject to the same regulatory requirements, or no regulatory requirements” and requires that those provisions “are implemented without increasing the regulatory requirements applicable to any provider of broadband services.” Through those provisions, the bill establishes a simple legal standard to help level the playing field in the broadband marketplace. The Breaux-Nickles measure serves as an excellent example of Sowell’s constrained vision of political philosophy since it focuses on getting the process right and making the rules simple and fair. The bill trusts companies and consumers to do the rest.

By contrast, a new bill by Sen. Ernest Hollings (D-S.C.), S. 2448, The Broadband Telecommunications Deployment Act of 2002, is an excellent example of the “unconstrained vision” in action, since it puts good intentions before good incentives and proposes a complex array of rules and programs to micromanage additional broadband networks into existence. The Hollings bill creates a Broadband Deployment and Demand Fund that would funnel federal funds to a number of causes in an attempt to jump-start broadband deployment, especially in rural areas. The bill would fund low-interest loans and grants for rural broadband projects and providers, government studies regarding what might help spur broadband deployment, pilot projects for wireless and other alternative broadband technologies in rural areas, grants to government labs and universities to help them deploy extremely high-speed broadband networks, other university grants for studies on useful consumer Internet applications, e-government grants, and grants to connect underrepresented colleges and communities to the Internet.

The bill also includes infrastructure-sharing mandates for the Baby Bells that mimic provisions found in Hollings’s previous effort, S. 1364, The Telecommunications Fair Competition Enforcement Act of 2001. This alarming measure proposes stiff new regulations and penalties for the Bells and contains an outline for a full-scale divestiture of the local telecom market to mimic the previous AT&T divestiture of the early 1980s. This disturbing “Baby Bell Breakup II” earned the ignominious distinction of being named the most destructive high-tech measure of 2001 in Cato’s study, “The Digital Dirty Dozen: The Most Destructive High-Tech Legislative Measures of the 107th Congress.

The sheer regulatory hubris at work in these measures is staggering. Senator Hollings apparently believes that the current problem in the broadband marketplace is that government has not done enough to deliver the goods to the masses. His solution is to micromanage the telecom marketplace through a jumble of complex rules and then prime the broadband pump by spending billions of taxpayer dollars on worthless studies, grants, and programs. And if that doesn’t work, Hollings proposes to tear it all down and start all over again. What is truly ironic about this unconstrained vision of broadband dreamland is that policymakers have spent decades engaged in similar pursuits with the promise of a better future seemingly always just one more rule or program away. But instead of producing the nirvana it promised, the government’s century-long experiment with the American telecommunications marketplace has merely yielded mounds of additional statutes and regulations to correct the problems created by previous efforts. The vicious circle of unconstrained utopianism continues with the Hollings bills.

The Breaux-Nickles approach offers a fresh approach based on the timeless principle of equality before the law. It does not pick winners and losers, pretend that supply and demand can be scientifically calibrated by a technocratic elite, or arrogantly assume that the whims of politicians and bureaucrats are superior to the voluntary interaction of companies and consumers. Support for such a vision is growing in the academic and business communities, where efforts are being made to push reforms such as the House-passed Tauzin-Dingell bill (H.R. 1542), The Internet Freedom and Broadband Deployment Act of 2001, and several important deregulatory rulemakings at the FCC. In conjunction with these efforts, the Breaux-Nickles offers a way out of the unconstrained idiocy that has haunted this industry for decades.

Adam Thierer (athierer [at] cato [dot] org) ) is the Director of Telecommunications Studies at the Cato Institute in Washington, D.C. To subscribe, or see a list of all previous TechKnowledge articles, visit www.cato.org/tech/tk-index.html.