Adelman: Tear Down Broadband Wall of Regulations

Posted March 4, 2011 at 4:50pm

Ex-Rep. Chip Pickering does a fine job extolling the virtues of Ronald Reagan and free-market competition in his recent telecommunications opinion piece (“Move Toward ‘Reagan Doctrine of Telecom,’” Feb. 15). Having served President Reagan for seven years as an ambassador to the United Nations and as arms control director — accompanying him on his superpower summits with Mikhail Gorbachev — I welcome anyone praising his philosophy.

Unfortunately, Pickering seems to miss a key point about applying the Reagan view of free-market competition to today’s business market.

First, Pickering is right that the foundation of today’s vibrant telecommunications market began in 1982 when the Reagan Justice Department broke up “Ma Bell,” the government-sanctioned AT&T monopoly. Next came the pro-competition Telecommunications Act of 1996, the first major overhaul of America’s phone laws since the Great Depression.

As important as these government actions were, the nation’s consumer phone and broadband markets continued to face strangling regulation. As a result, Americans’ adoption of broadband lagged horribly. So did investment and the rollout of new services.

It was only after 2004, when the Federal Communications Commission championed deployment of high-speed networks to consumers, that we saw, and felt, billions pumped into new services. AT&T, Verizon and other telecoms invested more than $30 billion to give residential customers lightning services over voice and Internet, and on video.

That innovative deregulation by the FCC, however, left out one area — the broadband business market. That still suffers from regulatory overkill, the type that Reagan would instinctively oppose and yet Pickering strangely overlooks.

Since we’re both Reaganites, I assume Pickering would join me in opposing any federal regulation that discourages investment and infrastructure build-out in the business market. That he, too, would see that such FCC policies have created a situation quite contrary to the Reagan philosophy and to free-market innovation.

Under the current FCC rules, companies rely on sharing the services and facilities of their competition at government-mandated rates. This sharing mechanism reduces any incentive to invest in new services and to deploy expensive high-capacity facilities. It clearly hurts job growth.

This is not to say that there is no competition or choice in the business broadband market. Some segments of the industry have chosen to invest in building broadband facilities for the business market and are using those facilities to compete successfully for customers. In addition, the wireless broadband trend that is sweeping the country is beginning to offer businesses, especially small businesses, additional choices for their broadband needs.

But the problem is that the legacy of regulation still encourages a kind of “pretend” competition. A few companies pay the cost of deploying new infrastructure while everyone else just buys access at government-mandated rates.

Hearing this, Reagan would repeat his adage, “Government does not solve problems. It subsidizes them.”

Pickering must realize that the FCC, in the business service market, has created a weird system, as government regulators give certain companies the “right” to compete by sharing — or freeloading on — others’ facilities. No wonder there’s been too much stagnation in business broadband investment, at least compared with the vibrant consumer broadband market.

Pickering writes that the business market lacks choice. Yet many businesses, especially small businesses, have plenty of broadband choices, including new wireless alternatives to traditional wired services. As mobile broadband speeds continue to increase, the business market will benefit just as citizens have benefited from residential wireless broadband.

Today competition in the broadband business market is at a crossroads, just as the residential market was during the last decade. Policymakers have a unique opportunity to create new jobs and bring the benefits of broadband technology to American business — but only if they would follow the Reagan legacy and clear away strangulating regulations that discourage new investment and build-out of high-speed facilities to the workplace.

The difference between the vibrancy of consumer broadband investment and the stagnation of business broadband services is like the difference between East and West Germany in the 1980s. A tall wall of regulation is stifling growth in the business market.

For federal regulators, it’s time to tear down that wall. And since Ronald Reagan is no longer around to give the cry, I would hope that Reaganites like Chip Pickering would join me in doing so.

Ken Adelman was an ambassador to the United Nations and director of the U.S. Arms Control and Disarmament Agency during the Reagan administration.