February 9, 2006 4:00 AM PST
Perspective: Happy 10th and bon voyage, Telecom ActSee all Perspectives
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But today, as these companies move to provide triple-play services of voice, video and data, the Telecom Act's artificial distinctions no longer apply. When competitors in the same market receive differential treatment from the government, consumers suffer.
Video programming, or what many people call "cable TV," provides a clear example of this. Due to advances in technology, a phone company can compete with cable by transmitting video programs through its fiber-optic lines. But to do so, it must first acquire a video franchise, or license, from every town or city that it plans to serve.
This is no easy task. For one thing, franchises don't come cheap. Local bureaucrats ask companies to cough up as much as 5 percent of their annual gross revenue, which of course raises the cost to consumers. The process is also time-consuming. To receive a franchise, a company must endure endless rounds of hearings, studies, audits and negotiations. At these negotiations, the politicians extort a host of so-called public services, including some completely irrelevant to telecommunications, like maintaining flower beds in front of government buildings. It takes months or even years before a competitor can get the rights to serve one city. All told, it could take anywhere from five to 10 years to be allowed to offer service to an entire state. Because of these restrictions, new innovators are blocked from entering the market and consumers suffer.
These laws originally stemmed from what was seen as cable television's natural monopoly on the market. But as new competitors moved in, the justification of controlling the monopoly faded away. Though these laws no longer make sense, they persist. Local franchise restrictions are but one of many examples of how the shortsighted government regulation of technology hampers progress.
As Europe and Japan surpass America in Internet deployment, Congress must enact sensible telecom reforms that eliminate artificial distinctions and myopic red tape in favor of rules that allow the market to work in cybertime. Sens. Jim DeMint and John Ensign have introduced bills that work toward this end. Among other things, the bills eliminate all local franchises on video programming. They acknowledge that the current rules are outdated and that 10 years from now, half-hearted deregulation will only have held the country further back.
So happy birthday, Telecom Act. But we'd rather say, "Bon voyage."
Matt Kibbe is the president and CEO of FreedomWorks, a free-market advocacy group based in Washington, D.C.
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