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July 29, 2002
CONTACT: David Fish
(202) 289-8928

Cleaning Up the Telecom Mess
FCC Chairman Acknowledges Problem; Will He Fix It?

WASHINGTON, D.C. - In an interview with a major national newspaper, FCC Chairman Michael Powell recently declared the telecommunications sector is in a state of “utter crisis” and acknowledged that federal communications policy – particularly the drive to create new companies in the wake of the 1996 Telecommunications Act – is somewhat to blame. But does Powell plan to do anything soon to clean up the mess? That is the question raised by Progress & Freedom Foundation Senior Fellow and Director of Communications Policy Studies Randolph J. May in an article published this week.

“If government policy helped create the mess, presumably a change in policy can contribute to its resolution,” May writes. “In short, what Powell most needs to do is to accelerate action on proposals pending at the FCC that would lessen regulation of the telecommunications industry, particularly ones that would free the former Bell companies form rules that discourage investment in new broadband networks.

“Now that he has acknowledged the industry is in ‘utter crisis,’ it’s high time to administer the cure by moving quickly to eliminate regulations that stifle new investment in facilities and that hold back new services,” he continues.

Prior to Powell's chairmanship, May says the FCC “adopted regulations that were designed and had the effect of encouraging anyone with a briefcase and a business plan labeled ‘telecommunications’ to become a telephone company and attract funding.” Those regulations required Bell companies to share their network facilities, even broadband fiber, at “below-book prices” with new competitors, something that he says resulted in less investment by both parties in additional facilities and helped tank the telecom sector.

Judging from Powell’s policy speeches, May is “pretty confident that what he has in mind is the current unduly burdensome and costly regulatory regime, especially as it applies to broadband.” If Powell acts, May says the sector and the economy would benefit from expenditures to develop next-generation applications, including Internet telephony, web-delivered software and advances in telemedicine.

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



The Progress & Freedom Foundation