The Telecommunications Act of 1996 is now 30 years old, and there has been a lot of events, hearings and webinars, including a congressional hearing, an FCC series of panels, Public Knowledge, Benton Foundation, TPI, Brookings, Broadband Breakfast, and a few others, all easily findable on the web.
The Act was supposed to open the wired networks to direct competition, that would lower prices and bring in new and innovative services that would be available via a new fiber optic wire to the home and business. And it would be delivered to everyone, equally, as this Act was an update of the original Communications Act of 1934.
With these words, Bruce Kushnick, a longtime critic of U.S. telecom policy, sums up the flawed magical thinking that made the envisioned future state immediately preceding this regulatory overhaul impossible to attain. As Kushnick describes it:
Starting in the 1990’s, a few years before the Telecom Act, America was promised a new shiny fiber optic future. Seven holding companies had been created in 1984 and given control over the existing state telecommunications public utilities, which were based on copper wire.The root cause is negligent policymaking. A dispassionate economic assessment would have determined advanced telecommunications like basic telecommunications before it that ran on copper networks providing analog voice telephone service functions as a natural monopoly like other utilities.
And in 1992, Vice President Al Gore laid out the ‘Information Superhighway’, a fiber replacement of this existing copper wires.
As such, facilities-based market competition would be highly unlikely to appear since the barriers to competitor entry against established incumbents would be too high and the future return on investment too distant.
As AT&T explained, the cost of modernizing the copper cable distribution network to fiber to the premise infrastructure is enormous. Its shareholders or investors and creditors and those of any other privately held company would be unable to bear them. Consequently, as Kushnick’s analysis alludes, multiple state level plans by the RBOCs to replace the copper with fiber were abandoned. The economics would not pencil out.
That reality would have been reasonably if not painfully obvious for any serious policymaking effort in the early 1990s, calling for a different approach: the one not chosen.
The seven holding companies to which Kushnick refers are the Regional Bell Operating Companies (RBOCs) formed out of the 1984 settlement of the federal government’s antitrust prosecution of AT&T in the 1970s. Had the proper policy been put in place, they could have formed the structural framework for Al Gore’s Information Superhighway that could have reached most every American doorstep by 2010.
How would it work? By creating a federal-private partnership with the RBOCs. The federal government would form a telecom authority that would take a majority stake in each of the RBOCs with an option for the RBOCs to negotiate a purchase of those stakes once universal fiber is built out in their respective regions as determined by a federal review.
This policy would have avoided decades of “broadband” battles at all levels of government over a constantly changing definition of broadband, where is available and at what price. And decades of unproductive protectionist lobbying by incumbent telephone and cable companies to stymie publicly owned and operated fiber delivery infrastructure despite its lower cost structure.
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