Conflict of Broadband Visions: Breaux‐​Nickles vs. Hollings

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In his masterful 1987 book, A Conflict of Visions:Ideological Origins of Political Struggles, prolific HooverInstitution scholar ThomasSowell provided a cogent analysis of the warring philosophicalparadigms that have dominated history. Sowell contrasts two majorvisions, 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 andnature, the importance of sound legal and economic incentives,justice as equal opportunity before the law, and simpleprocess-oriented legal rules, and see government generally as athreat to markets and liberty. By contrast, followers of the"unconstrained vision" believe in the fundamental perfectibility ofhumans and society, good intentions before good incentives, justiceas equality of outcomes, complex result-oriented legal rules, andgovernment as a benevolent director of markets and men to achieve aperfect society.

Sowell's philosophical paradigms provide an excellent way toanalyze the heated ongoing battles over telecommunicationsregulation and broadband policy. The war between the constrainedand unconstrained visions is currently on full display in theSenate as competing bills embody radically opposing visions of theway the broadband marketplace should be governed.

Senators John Breaux (D-La.) and Don Nickles (R-Okla.) recentlyintroduced S. 2430,The Broadband Regulatory Parity Act of 2002, which attempts to spurthe deployment of high-speed Internet networks by requiring thatthe Federal Communications Commission ensure regulatory parityamong the various providers of broadband services. Currently, cableand satellite companies provide broadband services to the publicwithout fear of burdensome FCC infrastructure-sharing mandates.Regional Bell Operating Companies ("Baby Bells"), however, facemany network interconnection and access mandates on their voicenetworks that might be applied to their broadband offerings. Ifsuch regulations were imposed, the Bells would have less incentiveto deploy expensive and complex new high-speed networks, especiallyin less densely populated areas.

Acknowledging the deployment disincentive created by suchinfrastructure-sharing mandates, and understanding the importanceof simple legal rules that guarantee equal treatment before thelaw, the Breaux-Nickles measure proposes the equivalent of a "MostFavored Nation" clause for telecom policy. MFN, a key element oftrade policy law and negotiations, stipulates that trading partnersaccord the same treatment to each other that they would offer totheir most favored trading partner. MFN has been a crucial part ofongoing efforts to liberalize trade globally since it guaranteesthat governments treat similar goods in similar ways and does so bylowering tariffs and trade barriers.

The Breaux-Nickles bill effectuates the same end for thedomestic telecom policy and does so by demanding that the FCCachieve broadband parity not by "regulating up" to put carriers onequal footing, but rather by "deregulating down." The bill statesthat "all providers of broadband service, and all providers ofbroadband access services, are subject to the same regulatoryrequirements, or no regulatory requirements" and requires thatthose provisions "are implemented without increasing the regulatoryrequirements applicable to any provider of broadband services."Through those provisions, the bill establishes a simple legalstandard to help level the playing field in the broadbandmarketplace. The Breaux-Nickles measure serves as an excellentexample of Sowell's constrained vision of political philosophysince it focuses on getting the process right and making the rulessimple and fair. The bill trusts companies and consumers to do therest.

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 acomplex array of rules and programs to micromanage additionalbroadband networks into existence. The Hollings bill creates aBroadband Deployment and Demand Fund that would funnel federalfunds to a number of causes in an attempt to jump-start broadbanddeployment, especially in rural areas. The bill would fundlow-interest loans and grants for rural broadband projects andproviders, government studies regarding what might help spurbroadband deployment, pilot projects for wireless and otheralternative broadband technologies in rural areas, grants togovernment labs and universities to help them deploy extremelyhigh-speed broadband networks, other university grants for studieson useful consumer Internet applications, e-government grants, andgrants to connect underrepresented colleges and communities to theInternet.

The bill also includes infrastructure-sharing mandates for theBaby Bells that mimic provisions found in Hollings's previouseffort, S. 1364,The Telecommunications Fair Competition Enforcement Act of 2001.This alarming measure proposes stiff new regulations and penaltiesfor the Bells and contains an outline for a full-scale divestitureof the local telecom market to mimic the previous AT&Tdivestiture of the early 1980s. This disturbing "Baby Bell Breakup II" earned the ignominiousdistinction of being named the most destructive high-tech measureof 2001 in Cato's study, "TheDigital Dirty Dozen: The Most Destructive High-Tech LegislativeMeasures of the 107th Congress."

The sheer regulatory hubris at work in these measures isstaggering. Senator Hollings apparently believes that the currentproblem in the broadband marketplace is that government has notdone enough to deliver the goods to the masses. His solution is tomicromanage the telecom marketplace through a jumble of complexrules and then prime the broadband pump by spending billions oftaxpayer dollars on worthless studies, grants, and programs. And ifthat doesn't work, Hollings proposes to tear it all down and startall over again. What is truly ironic about this unconstrainedvision of broadband dreamland is that policymakers have spentdecades engaged in similar pursuits with the promise of a betterfuture seemingly always just one more rule or program away. Butinstead of producing the nirvana it promised, the government'scentury-long experiment with the American telecommunicationsmarketplace has merely yielded mounds of additional statutes andregulations to correct the problems created by previous efforts.The vicious circle of unconstrained utopianism continues with theHollings bills.

The Breaux-Nickles approach offers a fresh approach based on thetimeless principle of equality before the law. It does not pickwinners and losers, pretend that supply and demand can bescientifically calibrated by a technocratic elite, or arrogantlyassume that the whims of politicians and bureaucrats are superiorto the voluntary interaction of companies and consumers. Supportfor such a vision is growing in the academicand business communities, where efforts are being made to pushreforms such as the House-passed Tauzin-Dingell bill (H.R. 1542), The InternetFreedom and Broadband Deployment Act of 2001, and several important deregulatory rulemakings atthe FCC. In conjunction with these efforts, the Breaux-Nicklesoffers a way out of the unconstrained idiocy that has haunted thisindustry for decades.