On February 8, 1996, President Bill Clinton signed into law the landmark Telecommunications Act of 1996, the most significant revision of the Communications Act since its enactment in 1934. In the 1996 Act’s preamble, Congress declared the statute’s purpose “to promote competition and reduce regulation.” And the conference report accompanying the law stated it was intended “to provide for a pro-competitive, deregulatory national policy framework.” At the signing ceremony, President Clinton’s rhetoric was soaring: “With the stroke of a pen, our laws will catch up with our future.”
Now, a quarter century after the Telecom Act’s passage, we can celebrate the 25th anniversary and acknowledge the achievement, while – with the benefit of hindsight – also taking a critical look at what the 1996 Act actually accomplished and whether it needs updating. This program will address these fundamental questions: (1) what did the 1996 Act get right; (2) what did it get wrong; and (3) should it now be updated or substantially rewritten, and if so, in what way?
The Federalist Society's Telecommunications & Electronic Media Practice Group is pleased to host a distinguished panel to address these questions.
Free State Foundation President Randolph May, a former FCC Associate General Counsel with over four decades of experience in the communications law and policy field, will moderate a discussion among experts: Harold Furthgott-Roth, a former FCC commissioner who served as a principal House Commerce Committee staff member working on the 1996 Act; Michelle Connolly, Professor of the Practice in the Economics Department at Duke University who twice served as Chief Economist at the FCC; and Chris Lewis, President and CEO of Public Knowledge who has served as Deputy Director of the FCC’s Office of Legislative Affairs.
Michelle Connolly, Professor of the Practice, Duke University; former Chief Economist, Federal Communications Commission
Chris Lewis, President & CEO, Public Knowledge; former Deputy Director, FCC Office of Legislative Affairs
Hon. Harold Furchtgott-Roth, Senior Fellow and Director, Center for the Economics of the Internet, Hudson Institute; former FCC Commissioner
Moderator: Randolph May, President, Free State Foundation; Executive Committee Member, Federalist Society's Telecommunications & Electronic Media Practice Group
This Zoom event is open to the public and registration is required. Register at the link above.
Dean Reuter: Welcome to Teleforum, a podcast of The Federalist Society's Practice Groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group teleforum calls, become a Federalist Society member today at www.fedsoc.org.
Nick Marr: Welcome, everyone, to The Federalist Society’s virtual teleforum panel. Today, February 10, 2021, we're discussing the Telecommunications Act at 25 years old. I’m Nick Marr, Assistant Director of Practice Groups at The Federalist Society.
As always, please note that expressions of opinion on our call today are those of our experts.
We have a very distinguished panel. I’m just going to introduce our moderator, and he’ll take it from there. We’re pleased this afternoon to be joined by Mr. Randolph May. He’s President of the Free State Foundation. He’s a member of our Federalist Society Telecommunications & Electronic Media Practice Group, who is hosting this call today. And He’s a former Associate General Counsel at the Federal Communications Commission.
And with that, Randy, the floor is yours.
Randolph May: Thank you. And thanks to The Federalist Society, of course, for hosting this. I’ll add my welcome to everyone to Nick’s. We do have a very distinguished panel with us. I’m going to introduce the panelists in just a few moments.
I’ll just say a bit about the program description, the program today. I don't want to take anything away or steal any thunder from our panelists, but it was 25 and 2 days, I guess now, 25 years ago that President Clinton signed into law the Telecommunications Act of 1996. This was the first major revision of the Communications Act of 1934 in all those intervening years. There had been some legislation here and there, but the Telecom Act of 1996 was a major piece of legislation that amended the 1934 Communications Act.
At the signing ceremony on February 8, President Clinton declared in his sometimes soaring rhetoric that he used, he said, quote, “With the stroke of a pen, our laws will catch up with our future.” And in the conference report accompanying the ’96 Act, the report said that the Congress intended, quote, “to provide for a procompetitive, deregulatory national policy framework,” close quote.
So there was much talk at the time that this ’96 Act marked the end of what sometimes was referred to as the command and control regulatory model embodied in the 1934 Act. That statute, of course, was grounded, really, in the notions of policing monopolistic power that the communications providers of that era enjoyed. It’s questionable whether, at least in my view, that radical change that was envisioned was realized in the deregulatory direction, but of course that’ll be part of the discussion that we’ll have today.
So we’re going to acknowledge the importance and celebrate the ’96 Act while, with the benefit of hindsight, take a critical look at what the Act actually accomplished and whether it’s in need of updating. So I’m going to ask the panelists to address at least these three fundamental questions. I’m sure there’ll be subparts and subsidiary questions, but I think we can organize it around these three questions. What did the Act get right? What did it get wrong? And should it now be updated and substantially rewritten, and if so, in what way?
So as I said, we’re fortunate to have a truly expert panel with us today, and I’m grateful for their participation. I’m just going to give you the relatively short version of their bios. You can find much longer versions on their websites, which are worth looking at because the accomplishments of these three are extensive. But here’s the short version.
Harold Furchtgott-Roth is presently a Senior Fellow and Director of the Center for Economics of the Internet at the Hudson Institute. Importantly for present purposes, Harold is a former FCC Commissioner, and he also served as Chief Economist at the House Commerce Committee and a principal House Commerce Committee staff member working on the 1996 Act.
Next, we have Chris Lewis. He’s President and CEO of Public Knowledge. Chris has served as a Deputy Director of the FCC Office of Legislative Affairs. He’s a former U.S. Senate staffer for the late Senator Edward Kennedy. And I noticed on his bio, which I think is important, he served two terms on the Alexandria City Public School Board.
I’m just going to add this personal note. Chris and I, as we say here in Washington, we don’t necessarily agree on all issues including probably the ones we’re going to talk about today, but I’m always impressed with the way he addresses the issues, and I’m always pleased that he accepts my invitations because I think he adds a lot to these discussions.
So finally, I’m pleased that Michelle Connolly is here. Michelle is Professor of the Practice in the Economics Department at Duke University. Importantly, again for present purposes, Michelle has served two stints as Chief Economist of the FCC. She’s the only person that’s served two different times as Chief Economist. Not only does Michelle teach at my alma mater, Duke University—and we’re not going to have any discussion today about Duke’s basketball team this year; that’s off the table—but Michelle is also a member of the Free State Foundation’s Board of Academic Advisors. And I’m appreciative for her service on that board.
Those are the panelists. So let’s go ahead and get started. And what I’d like to ask first is just for each of the panelists—and I’ll start with you, Harold—just to tell us where you were in 1996 and what you were doing at the time. And then after we go around the horn, we’ll get more into the substance. Harold?
Hon. Harold Furchtgott-Roth: Sure. Rady, thank you so much for organizing this panel. Twenty-five years ago, I was one of the staffers working on the Telecommunications Act of 1996. There were roughly two dozen of us who met practically every day for months in various hideaways and dark dungeons of the capitol. It was a different time. The capitol building was often closed, not because of riots but because of government funding shutdowns. It was a time of extreme partisan divides, lots of name-calling, lots of people not getting along.
But what became the Telecommunications Act of 1996 was a rare piece of legislation that had enormous bipartisan support. It passed overwhelmingly in both chambers by over 90 percent of both parties, and it was just a widely acclaimed bill. And 25 years ago, I had the privilege of working on it.
Randolph May: Well, you have a first-hand perspective, and that’s going to be really interesting as we go along. And I’m glad you brought up the fact that it passed almost unanimously. I think in the Senate there were two dissenting votes and only a handful in the House. It’s an interesting question whether the unanimity, looking back in retrospect with hindsight, if it was a positive or negative thing in terms of what developed, but that’s part of what we’ll talk about. Chris, tell us where you were in 1996, briefly.
Chris Lewis: Sure. And also, thank you, Randy, for inviting me. You know I always appreciate your invitations for lively discussions, so I’m glad to be here.
In 1996, believe it or not, I was a junior in high school in northern Virginia, the Thomas Jefferson High School for Science and Technology. Go, Colonials! But it was a special time for me and the internet because, really, it culminates in a year, 1995 to 1996, when we first got internet in the home as consumers in my household. My mother, God bless her, put in a second phone line so that we could have access to the internet while my father, who Randy knows is a college basketball coach, could still be on the phone making recruiting phone calls. So that was an exciting time in our home.
And it was also a time when one of my favorite teachers, Ms. Bertha Bryant at Thomas Jefferson, who is now retired, got me my first email address. I was in her class, and she taught us about surfing the web. So it was really my first introduction to the internet. And I feel like my generation, we’re the inheritors of Harold’s great work. So thank you, Harold.
Randolph May: Michelle, in 1996, what were you doing?
Prof. Michelle Connolly: I was stressing out. I was on the job market. I was finishing up my PhD and trying to get a job, and everything kept falling through. Until March, I wasn’t sure I was going to be gainfully employed. So I was very focused on my graduate studies. And at the time, I was working in international trade and growth, so all of these telecom issues were really not on my radar beyond just the fact that I now knew how to use the internet -- or knew how to use email and was still trying to figure out how to use the internet.
Randolph May: I’ll just add, in ’96, I was practicing law then before I got into the think tank world. And one of my clients was CompuServe, if anyone out there remembers CompuServe. That was before you could have an email address like Chris Lewis at yahoo dot com. We had a number. Mine was 76004, something or another, at CompuServe. And one of the -- and I was involved a bit in the lead up to the ’96 Act and advocating with other online providers the maintenance in the Act of the basic enhanced service distinction that was carried over in the ’96 Act as the distinction between information services and telecom services, which we still have lively and important discussions about.
So let’s get deeper into the substance now, and we’ll just keep going around, maybe, in that order. I’m going to ask Harold to take maybe just three minutes or so to tell us what the ’96 Act got right, and then we’ll come back to what it got wrong on the next cycle. So go ahead, Harold.
Hon. Harold Furchtgott-Roth: Sure. Thank you, Randy. I think it’s really important to try to remember just how bad communications law was on the eve of the 1996 Act. There was a federal district court in Washington that essentially had control of what were then called the regional Bell operating companies; seven at the time. We’re actually down to six, thanks to a merger. Anything they wanted to do, put a new piece of office furniture in a central office, that had to be approved by the good judge.
Randolph May: Harold, I’m sorry. Someone has asked if you could just turn your mike up or maybe sit a little closer. We want to make sure that you’re heard by everyone.
Hon. Harold Furchtgott-Roth: Okay, I’ll try to speak a little louder. I always have had a lifetime problem of speaking very softly, so I’ll try, for purposes of this, to speak a little bit more loudly.
Randolph May: That’s good.
Hon. Harold Furchtgott-Roth: I was just saying things were very bad on the eve of the ’96 Act. The telecom industry was in total disarray. The cable industry was suffering under the 1992 Cable Act which had practically led to an evaporation of investment in the industry. There was a consensus, a very rare industry consensus, that something had to happen, and that something was to change the existing laws. Everyone seemed to agree on that. There were no advocates for keeping the law as it was.
I think in broad brush strokes, the Act got a lot right. And I just was moving offices recently and came across a little talk I gave after I was sworn in as commissioner by, appropriately for The Federalist Society, Justice Antonin Scalia.
And at the end of my comments, I said, “Twenty-one years from now,”—because the ’96 Act had really been incubating for about twenty-one years—I said, “Twenty-one years from now, a new generation of Americans will look back on us and remark how primitive our telecommunications technology was.” This is in 1997. “I’m sure that they will be able to say that they benefitted from new technologies that developed despite and not because of regulation. I hope that they will be able to say that, ultimately, America has done well because this remained the freest, most open, and most vibrant economy in the world.”
There’s a lot of detail that one can argue with about what’s in the ’96 Act, but in broad brush strokes, the ’96 Act changed what was a horrible set of laws into a set of laws that allowed for the development of a very free and open telecommunications market, a very free and open set of regulatory structures that allowed for the development, frankly, of the internet, and the development of the five largest corporations in the world today, none of which really either existed or were very large back in 1996.
Randolph May: Okay. I’m curious, if it’s a short story, how did Justice Scalia come to administer your oath of office?
Hon. Harold Furchtgott-Roth: Mutual friends invited him.
Randolph May: That’s nice. Chris, what did the ’96 Act get right, in your view?
Chris Lewis: Well, I agree that there was a lot to celebrate in the ’96 Act. I think there were -- the focus on possibilities of having intense competition in the telecommunications and the burgeoning internet provider marketplace was, while I feel like it was short-lived, it really did come out of that era.
You asked about where I was in ’96. We had choices for who we would use to connect to the internet when my mother hooked up that phone line and we had dial-up internet. We knew about America Online—we didn’t use it—one popular ISP at the time. We used Erol’s, which I don’t think exists anymore. If it does, I don’t know, as an ISP. There were just so many options. And Harold knows better than me, but that really seemed to be a real thrust of the laws. So I think that was a real benefit and something that we’ve lost over time as we’ve had consolidation.
But there were great forward-looking proposals that were part of that law. The E-Rate program came out of that law—you mentioned my connection to public education—critically important to helping schools and libraries stay connected, a very popular program that continues to this day.
Controversy around Section 230 started with that law that we’re hearing folks talk about today, but again came in that spirit of we want to make sure that these new platforms that are rising up on top of the internet have an opportunity to grow without risk of the threat of what happens when people express themselves freely online. So a lot of interesting, sometimes controversial now, but also popular proposals came as a part of that large package, so a lot of positive things, yeah.
Randolph May: Right. Thank you, Chris. Harold, just for a moment, I want to go back to something you said at the end, just see whether I understood. You referred to the fact that the Act was responsible for creating I think you said five of the world’s largest corporations. Were you referring to the platforms Google and Facebook and Twitter and so forth, or when you were thinking about those corporations, just put that on the table?
Hon. Harold Furchtgott-Roth: Yes, I wouldn’t say the Act created them. What I would say is had the Act not been -- had communications laws remained as they were in 1995, I seriously doubt those companies would have been able to develop. And we as Americans have benefitted from having free and open telecommunications laws that have allowed for the development of companies that have not developed as well in other countries. I’ll just put it that way.
Randolph May: Right. Okay, Michelle, to you. What did the ’96 Act get right in your view?
Prof. Michelle Connolly: I wanted to make a joke in the beginning, but now I feel badly because this is rather momentous. But I did really like the inclusion of the V-chip in the Telecom Act. That was a nice addition.
But I do think that one of the aspects that I think Harold is probably thinking about that I think was quite good is this notion of federal preemption. And that is something that was absolutely necessary at the time in order to increase competition at local levels and I think remains a very important notion moving forward is the ability for the federal government or the FCC to preempt state and local regulations, which oftentimes become, I think, quite -- or can become quite captured and rent-seeking. And so that I think is an important component. Also the notions of interconnectedness between networks was a very important concept put forward in that Act. And then the V-chip.
Randolph May: Okay. Well, there may be some people that don’t know what the V-chip actually was that are listening. Just tell them and everyone what the V-chip was.
Prof. Michelle Connolly: This was the idea that a chip would have to be put into every television so that parents could control what their children might see in terms of violence or nudity or whatever. So it was to give consumer control. But it’s, I think, a good example of how this notion of a V-chip nowadays, given how we receive video on demand through all these different mechanisms—many of us may not even have real TVs anymore—it’s a good example of how quickly a certain technology becomes irrelevant.
Randolph May: Okay. And I’d forgotten about that over the last couple of decades, so that was a nice reminder, Michelle.
Okay, I’m going to come back to Harold. And now let’s talk about what, if anything, the Telecom Act got wrong. And of course, we’re doing this with the benefit of hindsight, a quarter century of hindsight. So the way that I think about it in discussing the issue, it’s not to criticize the framers and the Congress that voted on it because it’s much easier looking back than it would be at the time. But in my view, there are some things with the benefit of hindsight I might say they got wrong.
But let’s hear what the panelists have to say. Harold, go ahead and take it away.
Hon. Harold Furchtgott-Roth: Sure, Randy. I think, as I said in my earlier remarks, I think if you look at the broad brush strokes, if you look at the broad outcomes, I think it’s hard to say that the ’96 Act did a lot wrong. I think it did a lot right.
Of course, if you look at a lot of the details, you’ll find a lot of things that probably didn’t make sense at the time and certainly don’t make sense today. And Michelle points out a great one, the V-chip. I always -- at the time, I rolled my eyes and bit my tongue simply because I had a suspicion, and I think I was probably right, that in most households, every eight year old knows more about how to operate equipment than their parents do. And so the idea that you would put equipment for parents to control what their children are seeing is probably completely backwards. But that’s a separate story.
And I think the point that Chris is making about the fundamental theme of the Act was competition, the fundamental theme of the Act was to allow competition which had previously been prohibited by law. And at times, the commission got that right. And at times, maybe the commission didn’t get it quite as right as it could have. And I think one of the challenges in going from a world that is, Randy, as you described, it was just a complete regulatory system to an open market system. And how do you do that and calibrate that right?
And of course, there’s some details that probably are not as good as they could have been. I did a lot of work on Section 10 and Section 11, rarely used, some of the media ownership rules which I was absolutely sure were goners. And here we are, 25 years later. They’re still around. But I think these are details.
Randolph May: So I’m interested in what you said about Section 10 and 11. Those are the forbearance provisions and the provision requiring periodic regulatory review. I know the forbearance provision -- I once or twice have done some research on this, fairly extensive. And as far as I could determine, that provision which allows the commission to forbear from applying a regulation or forbear from applying a statutory provision as well, if it makes certain findings, that’s virtually unique among regulatory enabling statutes, as far as I could determine.
And I’ve always thought in my own view that it wasn’t used to the extent that the Congress may have intended it to be used. But you said in your view, that may be the case too. Just before I move on to Chris so we can keep maybe focusing on this, in that particular case, and even for now putting aside media ownership, why do you think that was the case? Was Congress just not specific enough in its direction, or is it the nature of regulatory agencies and so forth? What’s your view as a renowned economist?
Hon. Harold Furchtgott-Roth: Randy, I will just tell you my view as I am, which is just very frustrated. When I got to the commission, I was told they couldn’t do Section 11 because it was too difficult. So the first summer that I was a commissioner, I had a large group of interns. I probably had about two dozen. I said, “You all are going to do a Section 11 review.”
In three in months, they put together Section 11 review in which, to his credit, then Chairman Bill Kennard took some of those results and decided to go with them, things such as there were regulations requiring morse code on every ship and morse code operators. It was just unreal. There were regulations that were 100 years old that hadn’t really been updated. But I think you need to have a willingness and a belief that there really is a lot of regulatory underbrush and a lot of rules that probably don’t need to be around. And if you have that belief, and you start, and you look around, sure enough, you can find something.
Randolph May: Okay. Chris, let’s go over to you. Tell us what, if anything, you think the Act got wrong, in retrospect.
Chris Lewis: I talked a little bit before about how it seems like we’ve lost the choices in the marketplace, the competition that immediately followed the passage of the Act. And I feel like that’s the real missed opportunity in the implementation of the Act to really start to drill down and understand the new technology that was developing in the late ’90s and early 2000s, and the type of marketplace that it was developing into as it matured, and the values that are important to protect as that new technology develops and matures.
One of the lead sponsors who worked closely with Harold, Ed Markey, was speaking earlier this week about the 25th anniversary celebration. And he has all these flowery descriptions of how rabid he wanted competition to be coming out of the Act. But he also said that it was not meant to be just deregulatory by also demonopolizing.
And as we’ve seen the federal government in its oversight both at the FCC and antitrust enforcers allow for the marketplace to consolidate, we’ve seen fewer and fewer choices for connectivity to broadband, certainly, over the years, for average consumers as the technology has developed over time and as the expectations and the understanding of what folks get out of that connectivity matures. And so I think it’s been a real missed opportunity to enshrine that into some level of oversight to protect it.
I think that starts with basic values. Chairman Powell led the effort around the four freedoms, which then really led to the push for net neutrality rules. The value based insertion into the policy conversation, that can help build consensus around what actual regulations may be necessary, and then as we’ve seen at times with net neutrality debate or others can sometimes be paired with the ability to forbear from part of the Act that shouldn’t apply.
But I think we’ve gotten away from both the opportunity and the push to have competition and choices for consumers as well as interest in having the FCC protect those opportunities and those values, and other values as well. So I think that’s a missed opportunity.
Randolph May: Okay. Thank you, Chris. Michelle?
Prof. Michelle Connolly: So the thing that strikes me the most -- and I think this is not a criticism of those who wrote this because inherently we’re always writing regulation trailing the technology. We’re writing based on that we are now familiar with, which by the time we’re familiar with it, it’s probably halfway out the door.
But the main thing that I think has limited the Telecom Act of ’96 and would be a reason why I think it needs to be revisited at this stage was really a lack of foresight of the increase in intermodal competition. And the fact that everything was so specifically -- it had specific and separate regulatory regimes for specific technologies that were offering specific services.
And now we can see that there’s been huge convergence across all these different sectors, and they’re not truly independent anymore, or in any way independent anymore. And different technologies are now competing directly to provide the same services. And the way that the Telecom Act of ’96 was written was very siloed and therefore leads to these distortions where current competitors are being regulated in different ways. So it’s created some distortions.
Of course, it’s really easy for us now to say, “Well, why didn’t we anticipate all this intermodal competition?” But it does give us some insight as to, well, if we are to rewrite this, how would one want to rewrite -- what language would one want to use to write these new regulations so that we are encouraging competitions, that we do consider values that might be important, but in a way that as new technology changes, they can still be applicable and in an appropriate fashion.
Randolph May: Okay. Well, I can guarantee you that I’m going to come back to you and ask you how you would like to have it rewritten, so you can use this time to scribble down a few -- some legislative language, perhaps.
But before turning to the rewriting of the Act or updating, if our panelists think that should be done, I want to just let our audience know that I’m going to try and save some time to take a few questions. You can use the chat function to place a question in chat, and I’ll be able to see those questions. And if we have time, I’m hoping we’ll get to a few of your questions as well.
The other thing I might say is I always think it’s nice if the audience wants to tweet. I think again, as you already know, we are fortunate to have this panel that’s so knowledgeable about the subject. So I think there’s a lot of good stuff, if I could put it that way, really, to tweet about it if you would like. I think that handle #TelecomActChat might be a good one as well.
Okay, so now let’s get to the part where we can look ahead and discuss what should be done now to update the Communications Act. And we’re going to go around the horn again. We've got enough time. Each panelist can take three or four minutes to give us their view, and then we’ll take it from there. So Harold, back to you now.
Hon. Harold Furchtgott-Roth: Sure, Randy. On the first anniversary -- actually, before the first anniversary of the ’96 Act, there were members of Congress already talking about a rewrite of the ’96 Act. And it seems like every February 8th, there’s a discussion about how to rewrite the ’96 Act. And over the past 25 years, there have been some amendments. Some parts of the Act have changed. But there hasn’t been a major rewrite. And I have to say I don’t sense a broad consensus, a broad sense that the Act needs to be rewritten. And to the extent it does need to be rewritten, I don’t see a broad consensus about what direction that would go in.
Look, it’s very difficult for Congress to write a new law, particularly outside of spending bills and anything related to the budget. It happens, but it doesn’t happen very often. And for folks who have worked on Capitol Hill, as Chris has, as I have, we know it’s a rare event. And people sweat blood for years to get these things out. And when they get them out, it’s -- they’re never perfect. There always are problems.
But it’s hard to get them rewritten, and so I would just urge some caution about thinking about broad rewrites at this time. Maybe there’s a consensus that I’m just not aware of. I know there’s a lot of concern about specific sections. This year there’s a lot of concern about Section 230. In previous years, it’s been concern about other sections of the Act. Who knows what it will be next year?
But I just want to urge some caution in thinking about it, that it’s very hard to get legislation through Congress. And I think getting legislation to rewrite the ’96 Act would be, at least at this point in time, I think would be very difficult because I just don’t see a lot of -- I don’t see broad coalitions of people demanding massive change and just widespread consensus on Capitol Hill exactly what that would look like.
Randolph May: Well, that was spoken like a person with battle scars probably that are still there that maybe colors that reluctance, which I can appreciate. Of course, we know it’s very difficult these days to -- you’d almost say impossible to achieve the type of unanimity that was achieved back in ’96, so I hear what you’re saying.
I think maybe to put a gloss on the question, since the net neutrality issue -- that is to say, how to regulate broadband internet service providers, has been with us now for almost two decades. And everyone that’s on this call probably understands that we have gone back and forth between more or less strict regulation of broadband providers, whether under the rubric of Title II of the Communications Act or something else.
So I think I’ll just add to the question, and I’ll come back to Harold, too, if he wants to say anything on this after we cycle through again. But when you’re thinking about updating the Act, if you have thoughts specifically on how to address this ongoing controversy concerning the regulation or not of broadband providers with Congress—let’s put aside the FCC for now—then please give us your views on that as well.
And I’d just remind the audience if they have questions, you can go ahead and put them in the chat. Chris, turn to you.
Chris Lewis: Sure. So that adds a lot to what I could talk about.
Randolph May: But it is part of the discussion about updating the Act if one wanted to do it.
Chris Lewis: Yeah. And I think folks -- Public Knowledge, in our work, we’re strong advocates for strong net neutrality enforcement. And I think where that fits in with the broader approach of do you need to update the Act or not, remembering that the ’96 Act built on the ’34 Act, it didn’t eliminate the ’34 Act, and that there’s a current -- as I said before, there’s a basic set of values that I think and I hope folks on a broad scale can agree to. I would hope that any tweaks or updates would incorporate those values. So openness in net neutrality should be one of them, I think.
Does a rewrite or an update -- is that needed to ensure that? I don’t believe so. The court has been clear that if the FCC so chooses—and it’s gone back and forth on that choice—it has the power to create net neutrality rules under Title II. And there really has to be a decision on if we want net neutrality rules or not. Right now, we don’t have net neutrality rules. We have transparency rules, but we don’t have rules that prohibit blocking or throttling if a broadband provider so chooses. We don’t have any sort of investigation into whether or not interconnection that Michelle noted is so important in the network is fairly managed between dominant players and smaller players.
I could go on and on with the net neutrality debate, but I think that gives you a taste of what I’m thinking where you don’t have to update the Act, but you could. And I think it should be rooted in the value of trying to protect net neutrality, which has broad support. And really, my concern is that the debate around it has focused not on the rules that even the broadband providers seem to want to support, but whether or not they can actually be enforced, whether there is an agency with the authority to have that sort of oversight. That’s what concerns me.
Where I was going to go was a list of values that are important to be factored into any sort of update or any new legislation to tweak the law. Openness is one. Affordability is another. Universal access, referred to in the ’34 Act as universal service, the essentialness of the network to households and businesses and communities needs to be respected in an update to the Act or action at the FCC.
And again, without authority at the agency to deal with those and other values like the security of the network, the reliability of the network, the quality of the network and making sure everyone gets a quality network, if we don’t agree and if the pandemic hasn’t taught us that the network is essential to people’s lives, that a certain level of quality and openness and affordability is not only right and fair but necessary, then I don’t know what an update of the Act would be rooted in.
So I just threw a lot of values at you there, but to me, they all come back to having an agency with the expertise that we know it has from its fantastic staff, an agency with the authority to do that work and to set rules that are appropriate for the internet. And I believe that the current Act allows for that. I believe we saw that with the 2015 rules that included Harold’s point about forbearance to make them rightsized for the internet. But if folks don’t agree with that, then an update from Congress is a solution.
Randolph May: Okay. Thank you, Chris. And thank you for highlighting the point that the pandemic, I think, has made all of us aware, regardless of where we fall on a spectrum of being more or less regulatory on some of these issues, it certainly emphasized the importance of making broadband as accessible as possible. Michelle, what do you think about updating the Act, and how would you do it?
Prof. Michelle Connolly: So I wanted to respond a little bit to what Chris was saying because I think in many ways, we’re in agreement that if as a country we think certain things are important, we want to have that in our regulations. But having -- even if Congress said, “Oh, yes. The FCC has this authority,” I don’t think that solves the problem because for the same reason that Harold was saying it’s incredibly difficult to get Congress to pass new regulation or new law or even just say an amendment or an addition.
But the advantage of that is that whatever gets passed has some stability, whereas even if Congress simply gives the FCC absolute authority over this issue, the FCC is very capable every time there’s a new election of reversing what was done last time. And when we’re thinking about investment in infrastructure and all of these things, having things change every four years or every eight years and being able to expect that, even, is really not helpful. Whether you’re for or against net neutrality, I think the ping-ponging is quite disruptive and difficult. So that is certainly one issue where I feel like Congress needs to step in. I might not agree with how they step in.
But the other thing I worry about is if it’s given to the FCC, then the FCC is limited -- or isn’t limited, but there’s a tendency to then want the Title II regulation, which still has a lot from the 1934 Act. So that’s part of the issue is that if we don’t have any modifications to the current ’96 Act, and we say the FCC has absolute authority to it, the tools that have been given to the FCC kind of lead it toward this Title II regulation, where Title II is now really a very artificial segment of this communications market. It’s not reflective of the overall communications market.
So I think there’s the risk of the combination of the FCC being very political and changing with every cycle, and it having relative ease at changing things, but still having how it changes things be related to this Act that’s still carrying things over from the ’30s. So that’s kind of the cycle I think we need to somehow break.
Randolph May: Okay. I want to pick up on what Michelle said, but I’m just going to remind the audience again, if you have a question you’d like to pose, now’s a good time to put it in the chat function, and we’ll see whether we can get to those questions.
Let me just even make the discussion more specific, possibly, or at least follow on what Michelle said. We haven’t used the word stovepipe, I don’t think, in this discussion thus far, or silos. Or maybe someone did, and I missed it.
But one of the critiques of the ’96 Act was that it continued in place—again, this is with the benefit of hindsight—but we have in the Communications Act a structure in which different services, whether it’s broadcasting, cable, wireless, information services versus telecommunication services, they all have their own definitions. And with those definitions, which I’ve called in the past techno-functional constructs, because if you look at them and read the definitions, you’ll see that they mostly relate to technology and functions. And each one has associated with it it’s own set of regulatory requirements. And that’s the stovepipe regime.
So I’ve advocated that we tear down the stovepipe regime and replace it with something else. And what I’ve suggested -- and this would be a radical change, and I appreciate that a lot of what Harold said, that perhaps it’s unlikely we’re going to get there this year or next year, or maybe not in the next several years.
But putting that aside, putting the politics of it aside, I wanted to ask each panelist this. I’ve suggested that you replace the stovepipe regime with a new construct, a new standard, which basically ties regulatory activity of the FCC to market failure and consumer harm. In other words, that you would have to have some showing of market failure and consumer harm before the FCC regulates. Now, obviously, there would be nuances and there would be certain things totally outside of this like certain universal service programs, public safety, and those things, of course.
But I want to ask the panelists what their reaction would be to that type of very different model, just assuming we were going to have a new Communications Act. Let’s just go through quickly. Harold?
Hon. Harold Furchtgott-Roth: Randy, it’s an intriguing idea. And I think Michelle actually did used the word “siloed” a few times in some of her comments.
Randolph May: My apologies, Michelle.
Hon. Harold Furchtgott-Roth: In some perfect hypothetical world, if one could wave a magic wand and rewrite communications law, of course you wouldn’t want it to be siloed. Of course you wouldn’t want it to be technology specific.
And Randy, I think you raise a good point, which is to examine markets for competition, to examine markets for impediments to competition. That sounds an awful lot like existing laws we already have for different agencies, for the antitrust agencies, for the Department of Justice antitrust division, and for the Federal Trade Commission. A lot of the problems associated with the communications sector today—and I think Chris has identified some of those problems related to competition and problems related to the network—those are issues that the FCC is not alone. And indeed, the FCC is not the primary federal agency to address these issues.
One of the challenges, in fact, of going to a Title II regime for broadband internet service providers is it would exclude the Federal Trade Commission, not only from being able to enforce antitrust laws in that sector, but even consumer protection laws. So I would suggest in terms of looking at how to make the communications sector a more lawful sector, a sector that is more competitive, a sector that enhances consumer welfare, I wouldn’t focus just on the FCC. I think there are other federal agencies that have important government and regulatory roles to play in this endeavor.
Randolph May: All right. Chris, go ahead.
Chris Lewis: Wow. I’m trying to be nice, Randy, but I know I’ve got two really smart economists here, and I’m not one. But when I hear folks talking about the FTC and market failure, I think we’re losing sight of the public interest values rooted in the Communications Acts, in the ’34 and ’96 Act, that are critically important. And that antitrust enforcement and other powers of the Federal Trade Commission simply cannot address, the reliability and security of the network, the quality of the network, whether everyone is connected, cannot be addressed by antitrust enforcement, which is one off to an individual company, or the very limited powers of the FTC around consumer protection, which are really about whether companies are being straightforward and doing what they promised they would do.
There needs to be public interest obligations on these broadband companies because their connectivity is essential to everyone’s lives. And if we -- you can’t house that at a Federal Trade Commission, which is basically an enforcement agency. You need a regulatory body, which is why the FCC is the best place for it. And you need a regulatory body with the expertise in networks to do that.
It’s as if we were to say that the current situation right now with dominant digital platforms could be solved with just antitrust, which public knowledge has been outspoken in saying, well, we need antitrust enforcement of them. That is not enough. You need an expert agency that understands how these digital platforms impact public interest concerns, whether that’s content moderation or privacy.
There are similar public interest concerns when it comes to communications networks. And if we can’t acknowledge that, then people are going to be continued to be left out in a second or third generation of the internet age. There are people who don’t have access to affordable quality broadband now, and it’s not because of a market failure. It’s because the companies make business decisions on who they serve and who they will not serve. They choose not to compete against each other, which is why 80 percent of consumers today have only access to one or maybe two providers at really true broadband speeds that have the hundred megabyte capability to serve a whole household with all of its 5G world internet of things functions that people come to expect.
If consumers know the difference between the different stovepipes, the wireless and wireline stovepipes, and it shows in how consumers act, then those are real market indicators that we should take and point us towards these public interest values. I’m sorry I went on and on, Randy.
Randolph May: Chris, I wanted you with us, and always do, because your view is important. And I respect that view, and I know our panelists do. So that’s why I’m glad you’re here.
We did get one question, and since I invited questions and I know we’re getting now short on time, but I’m just going to read this question, which I think, assuming I can read it, I think it has some relevance. And then we’ll go around, and then we’ll wrap it up after this.
The question is, “Two panelists had mentioned the need to control net neutrality without describing the source of the problem, which is, one, that a single company, Netflix, uses more than 25 percent of the capacity of the internet, and two, the internet routing may choose to use international routes, shifting U.S. control completely, and number three, high definition is coming.”
So I think there are some points there. I’m just going to turn to Michelle to react to that, if she would, and then if others have quick reactions, they can add those before I have a chance to wrap it up. Michelle?
Prof. Michelle Connolly: I totally agree with the question that we’ve kind of been using the word net neutrality and in many ways not defining it, which I think is the biggest problem with the debate to begin with. There are differences between notions of openness versus notions of congestion. And there’s, from an economist’s perspective, there are notions of internal pricing that can allow for more efficient working of the network that are glossed over in a lot of the discussions of net neutrality.
And the fact that under the last version, under the Open Internet Order of 2015, the regulations were such that they were imposed on internet service providers but then not on content delivery networks and things like that. So we were very much glossing over the big picture questions on net neutrality in this discussion because we were thinking more about the regulatory side.
Whatever happens, and we know this will come up again, I do hope, although I’m really tired of being part of those discussions, that we will -- whoever looks over this or looks into this actually looks into all the dimensions because it’s not the case that I disagree with Chris that there’s some certain goals that we may want to have, certain transparency, certain openness, but there’s also the case that the manner in which someone tries to achieve that, if it’s through breaking of the market mechanism, that has a very different effect and different impact from, really, the intent.
Randolph May: Okay. I think what I’ll do is leave it at that. I will say I was a Duke undergraduate, as I may have mentioned before, and Michelle is a star economics professor at Duke University. And I think I learn more from listening to Michelle each time we have a chance to be together than I probably learned from three or four years at Duke from any other economics related course I took. So I’m always glad that Michelle is with us.
I could really go on for another couple hours, but we would overstay our welcome here, I think. So I want to thank, first of all, our audience for joining us. We always appreciate that. And again, I’m especially grateful that we were able to put together such a terrific group of panelists, so thank you Chris. Thank you, Harold, for being here. And Michelle, of course, thank you for being with us.
With that, I’m going to turn it back over to Nick. But before I do, I want to say this, that if I’m around at the time we celebrate the 50th anniversary of the Telecom Act of 1996, assuming there’s not a big one between now and then, I hope The Federalist Society will agree that they’ll let me host another panel then. And I won’t say how old I’ll be, but I said if I’m around then, Nick, I’d like to do it all over again. Take it away, Nick.
Nick Marr: Yeah, we’ll see. That’s a great idea. This was a great panel. Thank you all very much for joining us and for giving us your time and expertise. Thanks on behalf of The Federalist Society, and to our audience for calling in and for you great question. As always, be checking your emails and our website for announcements about upcoming teleforum calls and more Zoom panels like this. With that, thank you all for joining us today. We are adjourned.
Dean Reuter: Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s Practice Groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at www.fedsoc.org.