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CONTACT: Richard Zielinski
Date, 2004
(202) 289-8928
Don't Replace Stovepipes with Layers
May Argues for a Competition-Based Deregulatory Approach

WASHINGTON D.C. - There is an emerging consensus among policymakers that the radical changes in technology and in the marketplace mean it is time for a substantial revision of our communications laws. In an increasingly digital world, in which "a bit is a bit is a bit", the existing vertical stovepipe regime that applies disparate regulations to different services based on technology and functional characteristics no longer makes sense. In a column published by CNET, Progress & Freedom Foundation Senior Fellow and Director of Communications Policy Studies Randolph J. May argues the horizontal "Internet layers model" offered by MCI as a substitute for the current stovepipe regime should not be adopted. According to May, "what we need is a new market-oriented regulatory model, not a replacement regime based on another set of techno-functional definitions."

MCI identifies four "horizontal" Internet layers - content, applications, logical, and physical - and urges that policymakers adopt a comprehensive legal and regulatory framework based on these layers. Calling its layers model "a horizontal leap forward," MCI suggests that the two lower layers should be targeted for discrete regulation based on the existence of significant market power. Apart from MCI's characterization of market power residing in the lower layers, May has a more fundamental difference: "Turning stovepipes on their side is not a leap forward but is rather an invitation to stultify the continued evolution of our physical networks and the service applications that may be integrated into such networks."

"Rather than adopt new techno-functional regulatory constructs that would be virtually impossible to articulate in laws and would likely become quickly outdated, policymakers should adopt an antitrust-like approach that looks at whether communications services, however labeled for marketing purposes, are offered in workably competitive markets," writes May. Based on what we already know about the present competitiveness of communications markets - with cable companies offering telephone services, telephone companies offering video, satellite companies challenging cable companies, new VoIP offerings announced weekly, and electric utilities testing broadband over power lines - May says that when our communications laws are rewritten, Congress "should incorporate a strong presumption that the economic regulation that characterizes today's networks is unnecessary."

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