TechKnowledge No. 29

The Tauzin-Dingell Bill and the National Academy of Sciences Broadband Study: Calls for Broadband Freedom,

By Adam D. Thierer
December 14, 2001

As the year ends, the heated debate over the “Tauzin-Dingell bill” continues to rage as the House of Representatives considers a compromise version of this controversial legislation. H.R. 1542, The Internet Freedom and Broadband Deployment Act of 2001, is named after its two key sponsors, House Energy and Commerce Chairman Billy Tauzin (R-La.) and ranking member John Dingell (D-Mich.). As discussed in previous editions of this newsletter, the Tauzin-Dingell bill would help level the broadband playing field by allowing Baby Bell companies to offer customers broadband services the same way cable and satellite rivals currently can. This would, in turn, catalyze additional broadband deployment by the Bells, who are somewhat reluctant to roll out new services as aggressively as they might if not for the regulatory uncertainty surrounding the treatment of their broadband offerings.

In a nutshell, the Bells fear they might be forced to surrender operational control of their new services if infrastructure sharing (“forced access” or “mandatory unbundling”) requirements are placed on them that demand they share those new services with rivals. After all, would you want to build an expensive new network if the government told you that you would have to share it with all your closest competitors? The Tauzin-Dingell bill would limit such requirements. The bill also makes it clear that Bells can offer broadband services across long-distance boundaries, which they have not been allowed to cross with traditional voice traffic since the AT&T breakup in the early 1980s.

Therefore, despite the apocalyptic rhetoric of its opponents, all the Tauzin-Dingell bill does is grant the Bells the freedom to offer consumers the high-speed Internet services they want. Opponents of the Tauzin-Dingell bill still cannot answer the fundamental question that lies at the heart of this debate: Why should it ever be considered a crime to offer consumers an important, life-enriching service that they demand? The real motivation that lies behind the efforts of some rivals to derail the Tauzin-Dingell bill is that they would prefer to hitch a perpetual free ride on the Bells’ old and new networks instead of constructing competing facilities of their own. This is a shameful corporate philosophy and an even more disturbing and destructive economic principle when imposed on an industry through regulation.

As this bitter legislative debate unfolds, along comes a significant new report from a research arm of the National Academy of Sciences that provides an extensive set of excellent recommendations for policymakers to follow if they hope to bring broadband to the masses. The report, Broadband: Bringing Home the Bits is an impressive 228-page survey of the current state of the broadband marketplace that was the result of the collaborative efforts of a notable collection of academic and corporate technology experts. The report was organized by the Computer Science and Telecommunications Board, an operating unit within the National Research Council, which is the principal working arm of the NAS. Among the report’s many important findings and recommendations are the following:

  • The Telecom Act is more of a problem than a solution: “The present policy framework for broadband, which revolves around the Telecommunications Act of 1996, is problematic and is unsuited in several respects to the new era of broadband services,” the NAS report notes. Moreover, the report argues that changes may be necessary to the act since it was, “framed before the Internet was fully commercial,” and since it, “devotes too much of its attention to the voice telephony market and maintains distinct rules for various communications networks (telephone, cable, cellular, broadcasting, and so on).”
  • Level the regulatory playing field: Building on this last point, the report advocates that lawmakers “move toward a more coherent, consistent policy framework for broadband,” to avoid “policy-induced distortions in technology deployment.” Moreover, “If regulation of a broadband-delivered service is contemplated, it should be done in a service- rather than a technology-centric fashion,” so that cable, telco, and wireless providers are not subjected to different regulatory regimes.
  • Avoid broadband crystal ball gazing: The report cautions legislators to “avoid present-day policy making that is based upon presumptions about the final form of broadband markets.” The report stresses that the market needs time to naturally mature into a mass market so that demand and willingness to pay for broadband services can be better gauged.
  • Favor facilities-based competition over forced access and unbundling mandates: In a ringing indictment of the infrastructure socialism mentality that pervades modern telecom policy, the report boldly states that “in the long term and in the case of investment in new facilities, policies should favor facilities-based competition over mandatory unbundling,” since the former: (1) reduces the need for persistent regulatory intervention, (2) permits the natural character of the broadband service and industry structure to be discerned, (3) promotes diversity in technology bases and cost structures, (4) avoids deterring competitors from investing in their own infrastructure, (5) removes the disincentive to new investment by incumbents, (6) avoids costs and organizational complications associated with coordination between incumbents and competitors, and (7) facilitates technical optimization of total bandwidth.
  • Expand spectrum options: The report recommends that policymakers “ensure appropriate radio spectrum for broadband and associated capabilities” since “both licensed and unlicensed spectrum plays a role in enabling various wireless broadband alternatives as well as local area and mobile capabilities that compliment and supplement wireline broadband access.”
  • Reduce federal, state, and local rules to ease market entry or to stimulate investment: The report calls on all governments to remove barriers to greater broadband deployment. At the local level, this includes providing greater access to rights-of-way, relaxing franchise fees or obligations, and changing permitting or zoning rules to accommodate more investment.

To be sure, the NAS report is not an across-the-board free market manifesto. It recommends a handful of targeted forms of government intervention to foster broadband deployment such as tax credits, increased research and development efforts, and municipal government direct investment in broadband backbone facilities. Nonetheless, on the issues that truly matter to future broadband deployment, the report hits the nail right on the head. Increased broadband investment and deployment will only occur in a legal environment uncluttered by the illogical distinctions of the past and free of burdensome, innovation-deterring infrastructure-sharing mandates. Congress should take the lessons of the NAS report to heart as it continues to debate the rather limited reforms set forth in the compromise Tauzin-Dingell bill.

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.