Wednesday, December 4, 2013

Will Change to Communications Act of 1996 Create New Winners, Losers?

Fundamental changes in national communications law do not happen all that often. In the United States, the Communications Act of 1934 was not fundamentally revised until the Communications Act of 1996.

So it is noteworthy that there are rumblings of a possible effort to revamp the Communications Act of 1996.

Congressman Fred Upton (R-MI), head of the House Energy and Commerce Committee, and congressman Greg Walden (R-OR), chair of the Communications and Technology subcommittee, say they could possibly undertake changes to the Communications Act of 1996 as soon as 2015.

Among the likely areas of change are the rules that govern providers of the same services, across different industry silos. Many would argue that, under competitive conditions, it does not make sense to apply different rules to providers and technologies that compete in the same markets.

The big philosophical question is whether lawmakers move to apply less-restrictive rules across the boundaries, or apply more-restrictive rules across the industry lines. In other words, telco executives likely would prefer less-stringent cable TV style regulation over common carrier rules.

And that will remain the challenge. Each industry will naturally prefer rules that favor it, and are at least neutral, or perhaps inhibiting, to key competitors. So the issue is how to harmonize the rules in a mostly “neutral” way, to retain support across the board. It never is easy.

For the moment, they will hold a series of hearings in 2014.

The potential change highlights a key facet of the communications business: communications regulators and lawmakers are vital and foundational in every country.

Communications laws always pick winners and losers, since no firm can be in business without a decision by government to allow an industry to exist and allow firms to be in the business.

Communications policies also enable and set boundaries on use of specific technologies, revenue models and sometimes even profit margin.

In the United States, prior to 1996, for example, it was illegal for more than one firm to provide local telecom service in a local area. In Myanmar, until 2013, only two mobile service providers could be in business. In 2013, that number expanded to four.

Whether a firm can try and enter a business is fundamental, and is a matter of government policy. Governments can encourage competitors, or restrict existing providers from entering new markets.

Governments affect pricing policies for some products. And governments always have a say about whether a specific company can buy another company, or whether certain companies lawfully can attempt to buy another firm in the business. The former generally is a result of antitrust policy, the latter more often a matter of foreign investment rules.

So it is noteworthy that there is some movement to update the Communications Act of 1996, itself the first significant change in national communications policy since 1934.

As always, political support and “timing” are crucial. Lots of legislation gets introduced in Congress; little of it has a chance of passing.

It isn’t yet clear whether the requisite climate of “this is on the agenda now, and has to be dealt with,” can be built.

But current Federal Communications Commission Commissioner Ajit Pai supports the initiative.

Comcast, AT&T, the National Association of Broadcasters and the National Cable and Telecommunications Association already have said they support the effort.

At least initially, that is formidable. Any bit of legislation has less chance of getting support when industries collide. There is much greater chance when industries agree that a change is needed.

But this is about winners and losers, make no mistake.

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