TCS Daily


How Tauzin Can Keep His Word And Stop Telecom "Remonopolization"

By James K. Glassman - February 19, 2001 12:00 AM

Go to the official website of U.S. Rep. Billy Tauzin, the new chairman of the broad and powerful House Committee on Energy and Commerce. There's a big, bold, italic headline that says, "Je suis fier de representer le troisieme district de la Louisiane," above a picture of this proud representative of the third district of Louisiana in camouflage hunting gear, standing in a boat and holding up two huge fish (to my untutored eye, they look like tarpon). Meet Billy Tauzin.

He is the latest in a long line of Louisiana politicians to gain national prominence: Huey and Russell Long, Hale Boggs, F. Edward Hebert and Bob Livingston (who nearly went higher than any of them). Tauzin, however, took a circuitous route. He was first a Democrat, then switched. He claims to be the only member of Congress ever to serve in the leadership of both parties.

I lived in Louisiana from 1972 to 1979, where I founded and edited a weekly newspaper in New Orleans. I have known Tauzin a long time. We have shared similar political passions, and he appeared several times as an outspoken guest on my television series on PBS, "TechnoPolitics." We've talked about difficult personal matters, too, and we like each other.

Tauzin's basic instincts on public policy are good. He is truly one of us - a free-market zealot. But sometimes his enthusiasm sends him off into remote bayous. He became wildly enthusiastic about replacing the current tax code with a national retail sales tax - an idea that's sound theoretically (a simple system that taxes only consumption) but that would be impossible to enforce. Hardly anyone takes the idea seriously, and the co-author of his legislation to change the tax law is Rep. Jim Traficant, D-Ohio, the most flamboyant and probably least respected member of the House.

In 1999, Tauzin became concerned about the lagging dissemination of high-speed broadband Internet services to American consumers and small businesses. The Telecommunications Act of 1996 - signed into law five years ago this month - had promised better and cheaper telecommunications through competition and choice. But on broadband, at least, it has not delivered.

On the problem, Tauzin was right, just as he had been right on the tax problem. But, to complete the analogy, I think he was wrong in both cases on the solution.

Tauzin introduced a bill called the Internet Freedom and Broadband Deployment Act that would solve the problem, he believed, by allowing the Regional Bell Operating Companies, or RBOCs -- the local monopoly phone companies that had been created through the breakup of AT&T in 1984 - to get into the long-distance data services (that is, broadband) business immediately.

For a supporter of the original 1996 law, it was a weird, inexplicable try at a solution.

On Feb. 12, at a panel discussion held in the Cannon Caucus Room on Capitol Hill, I asked Tauzin about his bill, called H.R. 2420. The format of the session, sponsored by a new group called TechIssues.net, was that each of us seven panelists - five civilians plus Tauzin and Rep. Silvestre Reyes, D-Texas - could make a three-minute statement. Then the five could each ask a question of one or both of the two members. The topic was simply "Broadband," and the moderator was former Rep. Jack Fields of Texas, a key member of the Commerce Committee when he was in the House.

My own statement (which you can find in full on this site) also decried the slow rollout of broadband but argued that "gutting the act is no solution - neither, by the way, is it instant deregulation, as so many contend."

The 1996 law, I said, was based on an important idea - that the way to deregulate telecommunications (the goal everyone at the table professed to desire) was to give the local Bells, which controlled the "last mile" into the homes of just about every American, a big incentive. They could get into the long-distance business, which had already been deregulated, as soon as they opened up their local networks to competition. They were required to allow interconnection with their systems and to sell local service wholesale to competitors at reasonable rates.

But the Bells dragged their feet. Competitors were burdened with high wholesale costs and a lack of cooperation. Many are now going out of business. An editorial cited "legal roadblocks," "delays," and "hardball tactics." Meanwhile, as wireless and long-distances prices have plummeted, local-service prices have risen 10 percent since 1996.

"Incredibly," I said, "some in Congress [led by my friend Billy Tauzin] want to get rid of the only incentive the Bells have to open up to competition - the lure of being able to get into the long-distance business. Bills have been introduced [including H.R. 2420] that would let the Bells into the data part of long-distance (the largest part now, and very profitable) immediately - in order to spread broadband."

In other words, Tauzin wants to remove the carrot.

When my time came to question him, I asked how such a change in the law could possibly inspire the Bells to open up their local connections. Currently, they have a stranglehold on local service (97 percent of consumers and small businesses get their service from a Bell). Why would they give it up if they could get straight into data.

Tauzin answered that voice long-distance remained an incentive. Really? Has he looked at the stock prices of long-distance companies lately? The competition is fierce, and voice is dropping sharply as a proportion of total long-distance service.

He also said that the 1996 act was intended to deal with voice, not data, since broadband was in its infancy. Really? Then, why not call it the "Voice Act of 1996." The truth is that nothing in the law excludes broadband from the interconnection requirement. And, even if the act did not foresee broadband, then the advent of data simply provides an even stronger incentive for the Bells to open up.

I also raised the issue of "remonopolization" - the original seven Bells plus GTE, eight companies holding local monopolies, are now down to just four. This was the last thing Congress wanted when it passed the Telecom Act of 1996. Legislators expected more competition, not less.

Tauzin, in his response, was sympathetic. He had quoted earlier from an article I wrote on remonopolization and that appeared on the op-ed pages of the Dec. 27 Washington Times, "For Whom the Bells Toll: Death of Telecom Competition." And he said now that he would "insist that remonopolization does not happen" - though it seems that H.R. 2420 would enhance the power of the four firms (and, who knows, maybe they will soon be down to two or three?).

Just read the statement on his site about his "Internet Freedom" legislation: "H.R. 2420 frees the Regional Bell Operating Companies (RBOCs) to 'build out' and offer high speed Internet data and backbone hub services on a level playing field in competition with cable companies and current backbone providers. Do the cable and backbone companies want that to happen? Of course not! It's competition."

Tauzin, though well-meaning, has it exactly backwards. His bill, which has scores of co-sponsors, including the top Democrat on the Commerce Committee, would freeze local monopolies in place and allow the Bells to leverage their hold on the last mile into dominance in broadband as well.

As the discussion ended last Monday, I had the impression that Tauzin, a thoughtful guy, was beginning to have doubts about his own approach. I hope so. As I said in the Cannon Caucus Room, the authors of the Telecom Act had a great idea. The reason it is not working is that the act simply hasn't been enforced. Why reject it without trying it?
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