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Change Is Coming

12/19/2011 12:01 AM Eastern

The following is an edited excerpt from a Dec. 14 speech by
National Cable & Telecommunications Association president
Michael Powell at The Media Institute in Washington.

In communications, we too often
make things so mind-numbingly complex. Just
the language we use can make your eardrums
bounce around like a tympani being beaten by
a 2-year-old high on Halloween candy.

Steve Jobs, a brilliant inventor and artist who
brought together like no other the concepts
of beauty and technology to produce — in his
words — “insanely great products,” famously
believed that “simplicity is sophistication.” The
man believed in Bauhaus architecture and Zen
Buddhism. Less was more in his mind, and he
passionately guided his products, his company
and his life by these concepts.

I wonder whether we might learn a thing or two about
simplicity and embrace our inner Steve Jobs as we think
about our services and our regulatory models.

We should weigh the simplicity paradigm more heavily,
because I think we are going to be forced into reconsidering
our underlying regulatory model, even without a complete
rewrite of the Telecom Act. There are two cornerstones on
which the Communications Act rests, and both are cracking.

The first is the venerable public-trustee model of broadcasting.
Huge swaths of the act are derived from the 1930s
premise of industries being required to act in the public interest,
convenience and necessity. Broadcasting regulation
is cobbled together on the dubious premise that spectrum
is a scarce resource that is owned by the government, who
in its benevolence licenses it for use by broadcasters in exchange
for a commitment to operate in the public interest.

The scarcity rationale also undergirds the even more suspect
view that broadcasting is less entitled to First Amendment
protection than other forms of communication. The
notion of a communications industry being a quasi-public
appendage of the state is repeatedly invoked — sometimes
openly, at other times more subtly — to justify significant
regulatory interventions. It is eye-opening to realize that
most cable regulation has its roots in the FCC’s desire to protect
broadcasting from a competitive threat in order to preserve
the public trustee model.

Yet, today the Congress and the FCC are on the verge —
perhaps for the first time — of declaring the highest and best
use of spectrum is not broadcasting but, instead, broadband.
I think that undercuts a major premise for a whole
host of regulations in the Communications Act.
Moreover, in one month the Supreme Court
may move to overrule the scarcity rationale for
granting the government exceptional authority
to curtail speech.

And then what? I believe many broadcast
regulations — both those that burden the industry
and those that uniquely benefit the industry
— will have to be rethought. And, many
cable regulations like must-carry, too, lose their
validity and underlying rationale.

The common-carriage model is the second
major pillar supporting the Communications
Act, and it also is badly damaged. The fundamental
predicates of common carriage are the presence of natural
monopoly. But today it is not convincing that there is an unavoidable
monopoly in the market or that monopoly alone
can most efficiently allocate public goods.

Too often, we see calls for a governmental declaration of
natural monopoly as a way of restoring discredited regulatory
controls and shifting more power to the state to centrally
direct the evolution of markets. Even more seductive
to the regulator is the opportunity to extract socially beneficial concessions as a trade for permitting monopoly.

A few things have undermined this model. For one, the
government no longer guarantees any industry segment
exclusivity (except rural telcos) as a way to finance social
objectives. Second, while honest people can debate how
concentrated the markets happen to be, the claim that monopoly
is unavoidable because scale efficiencies make it the
best way to provide service is tarnished by the facts in the
market showing innovation, substantial investment, price
discipline and the presence of competitive alternatives. The
economic, legal and political credibility for such an argument
are simply weak.

As these models wither, we will eventually be challenged
to devise what comes next.


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