Congress, Industry: A Bad Connection

[It] is a highly controversial proposal to restructure the communications industry. Currently, the industry is nominally governed by the Communications Act of 1934. This law, however, is so outdated and so inadequate to modern technologies that the industry is de facto governed by a range of FCC and court rulings. That some sort of comprehensive communications legislation is needed is not disputed by any party.

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So began a Senate staff memo about a major piece of legislation, one that was the subject of intense industry lobbying but was barely comprehensible to most citizens. This year’s mammoth telecommunications reform bill, perhaps?

Well, no. The above was written by yours truly back in 1981, when I was a fresh-faced summer intern in the office of Sen. William Proxmire. The old AT&T; was still intact. The wireless phone was a rare luxury. Nobody had ever heard of Ted Turner or John Malone or an obscure computer science project known as the Internet.

Yet the issues of 1981, as I look back on them now, were oddly similar to the issues of 1995. And the explosive development of the communications industry since then gives the lie to a piece of conventional wisdom that I readily accepted then and that too many people still accept now: that Congress, rather than courts or regulatory commissions, is the proper venue for establishing communications industry regulations.

Given the disgracefully inefficient and undemocratic manner in which Congress has handled the issue thus far--and industry’s ability to operate just fine in the absence of new laws--maybe we’d be better off after all with the Federal Communications Commission and the state regulatory commissions and some smart, stubborn judges such as controversial U.S. District Judge Harold Greene.

Like its 1995 counterpart, the legislation of 1981, known as S-898, was touted as a way of introducing greater competition into an industry dominated by entrenched monopolies. Back then, of course, the monopoly was AT&T.; It enjoyed complete control of local phone service in most of the country, and faced only a few fledgling competitors in the long-distance business.

But AT&T; didn’t like the fact that its basic phone business was closely regulated. It wanted permission to offer competitive long-distance services on an unregulated basis, and it wanted to enter new markets. The solution was to set up a “fully separate” subsidiary through which AT&T; could get into new and unregulated businesses.

This provoked howls of outrage from competitors, who were terrified of AT&T;’s power and had little faith that the separate subsidiary arrangement would prevent Ma Bell from using its control over the basic phone business to gain advantage in new markets. An amendment suggested that the new AT&T; subsidiary not be allowed to build its own facilities for offering unregulated long-distance services until there was real competition in the market.

And tacked on to the bill was a provision stripping local governments of their authority to regulate the cable television industry.

Now, fast-forward to 1995. AT&T; has been broken up, of course, but its progeny--the regional Bell operating companies--continue to enjoy almost complete control of the local telephone business. They don’t like the fact that their core business is regulated, and they especially don’t like the fact that they are barred from offering long-distance service. They propose to get into long distance through separate subsidiaries, but rivals want to assure that the Baby Bells are kept out of that business until there is competition for local phone service.

And tacked on to the bill are a series of provisions loosening regulation of the television industry.

In both cases, the heart of the bill was an effort by large, cash-rich and heavily regulated monopolies to gain the freedom to enter new markets. It’s true, of course, that the Baby Bells’ clout does not measure up to the old AT&T;, and their rivals--including the new AT&T;, and now-powerful companies such as MCI and Sprint--are anything but fledgling. Still, in 1995 as in 1981, the weakness of the monopolies’ argument is matched only by the strength of their lobbying corps.

S-898 was ultimately passed by the Senate, but the House was less enthusiastic and the legislation never came close to being enacted. And what happened subsequently shows just how fortunate an outcome that was: AT&T; agreed to break itself up to settle a government antitrust suit, paving the way for much broader and more intense competition than S-898 would ever have produced.

Judge Greene continues to oversee enforcement of the breakup agreement. The FCC, the federal appellate court that has jurisdiction over it and state regulatory commissions nationwide have gradually moved toward deregulation on many fronts. Phone companies have won the right to offer some new services, namely cable TV, via lawsuits arguing that rules barring them from that business were a violation of their 1st Amendment right to free speech. The cable industry issues were addressed in separate legislation.

It’s popular today, especially among the Baby Bells, to decry the broad influence of non-elected jurists over the communications industry, especially the influence of Judge Greene. Many also believe that a hodgepodge of different laws in different states is a big problem, and that uniform federal rules are thus needed on issues such as competition in the local phone business. And surely we need a replacement for the ancient Communications Act!

But the philosophical argument for congressional action rests mainly on the idea that it is Congress, as a democratic body representing the people, that’s supposed to make laws. Yet it’s hard to think of a piece of legislation where the interests of the public at large have been as secondary as they are in this year’s telecommunications bill. The main issues are being handled behind closed doors by congressional staff members who are in close touch with an army of industry lobbyists, who have bought access with tens of millions of dollars in political contributions.

The debate has deteriorated into a shadow play of deal-making among industry interests, much of it involving issues that should not even be considered together in the first place. What do broadcast TV ownership limits really have to do with long-distance telephone service? Why does a measure touted as a deregulation effort contain sweeping new restrictions on the content of online communications? And why isn’t anyone other than the lobbyists making a coherent argument as to why this bill should be approved?

At the end of my memo of 14 years ago, I wrote, “Legislation is badly needed in this area, and thus less-than-ideal legislation is better than none at all.” But history has proven me wrong. In the absence of congressional action, the executive and the judicial branches of government have actually done a fine job. They’ve probably represented the public interest better than Congress. For whatever one thinks of Judge Greene, he at least isn’t in anyone’s pocket.