Cato Policy Report, November/December 1997
Cato Conference:
Is the Telecom Act of 1996 a Failure?
Replace the FCC with common law
The telecosm is too large, too heterogeneous, too turbulent, too creatively chaotic to be governed wholesale, from the top down," said Peter Huber at a September 12th Cato Institute conference, "Beyond the Telecommunications Act of 1996: The Future of Deregulation." Huber, senior fellow at the Manhattan Institute and author of Orwell's Revenge, and Tom Hazlett, professor of economics at the University of California at Davis, maintained that the Federal Communications Commission should be eliminated and regulation of the telecosm left to common law.
Solveig Singleton, director of information studies at Cato, went one step further and considered what the telecom industry would look like had the FCC never been created and the industry never been regulated. She conceded that it is likely that the industry would be highly concentrated but argued that concentration is not necessarily a bad thing. "When you look at many concentrated markets, such as the computer industry, consumers are doing quite well. We need to change our focus on what telecom competition should look like. Despite Reed Hundt's claims, it will never look like and will never have as many entrants as the market for shoes."
In his luncheon address,
"Resisting the Temptation to Micromanage
Deregulation: Lessons from Airline and Trucking
Deregulation," Alfred Kahn, former chairman of the
Civil Aeronautics Board, maintained that regulation is
needed "to protect captive consumers and to provide
equal access to essential facilities." But, he said,
the FCC has done much more than that. "They have
engaged in inexcusably gross handicapping of the
competitive process. They have cartelized the industry
and protected inefficient competitors from well-deserved
extinction." Evan Kwerel and John Williams of the
FCC conceded that their agency has done much to prevent
the efficient use of spectrum. In addition to retaining
large amounts of spectrum, the government has too
narrowly circumscribed the manner in which privately
managed bands can be used. "An essential step toward
an efficient market allocation process," said
Kwerel, "is to exclusively assign all or virtually
all spectrum rights. These rights include all uses at all
points in time, frequencies, and geographic
locations."
Broadcasting pioneer Stanley Hubbard agreed with Kwerel and Williams, stating, "Broadcasters should be free to do whatever they wish within the confines of the general laws of the land." He argued that "those individuals and companies that pioneered and own radio and television stations should have clear title to their licenses just as if the licenses were land grants."
With the growth of the Internet, many people have argued that government should provide everyone free access to the Web, much like it provides a high school education. Lawrence Gasman, senior fellow at the Cato Institute, challenged that idea. He maintained that the "real reason why government programs for helping information have-nots enjoy so much support is not because those programs make any economic or moral sense but because they are politically profitable. Leftish Democrats can be seen as doing something for the poor, while conservative Republicans can be seen as doing something for their rural constituents."
The papers presented at the conference will be published as a book next year.
This article originally appeared in the November/December 1997 edition of Cato Policy Report.