TCS Daily

The New Telecom Players

By Tom Readmond - June 29, 2005 12:00 AM

It's long been said that government policy is about 20 years behind technology, which is what has always made telecommunications policy so tricky. By the time the long, deliberative policymaking process is completed, and all the necessary constituencies are pacified, innovators have come up with a dozen more ways to communicate, all of which cause regulators and tax collectors to salivate anew.

It should come as no surprise, then, that the nine years since Congress last enacted major telecommunications legislation have been filled with acrimonious battles and complex rulings worthy of a colossal migraine. With Congress poised to focus on telecom issues this year and next, it might be helpful to consider the new players who will shape telecom policy for the foreseeable future.

The most obvious is Kevin Martin, recently tapped to serve as chairman of the Federal Communications Commission. Martin, who has served on the Commission since 2001, is a staunch conservative and deregulator. While on the commission, Martin has made his mark as an advocate of tougher enforcement of indecency rules, as well as opposing efforts to free the Bells' obligations to offer their telephone networks to competitors at discounted rates.

On the Hill, both the House Energy and Commerce Committee and the Senate Commerce Committee have fairly new chairmen: Rep. Joe Barton (R-TX) and Sen. Ted Stevens (R-AK), respectively.

Barton is fully committed to a plan to kick start the transition to digital television (DTV) by setting a hard date for broadcasters to return analog spectrum to the federal government. Broadcasters have been granted digital spectrum, but under current law only have to return their analog spectrum when 85 percent of homes are capable of receiving digital signals - a benchmark that is still years away. Barton would set a deadline of Dec. 31, 2008 for the spectrum to be returned, after which it would be auctioned off for other uses. Opponents argue that since the transition would cause analog televisions to go dark, the federal government should subsidize digital converters for those units. The size of that subsidy, if any, is a source of ongoing debate on the Hill.

Stevens, by geographic necessity, is a firm supporter of universal service, in which telephone users are forced to subsidize phone service in sparsely populated areas. While a universal service fund exists for traditional phone service, it remains to be seen how this will apply to broadband and wi-fi. As chairman of the committee, it's fair to say Stevens will see to it that the new Telecom Act addresses this thoroughly.

The major telecom legislation of this Congress, a rewrite of the 1996 Telecommunications Act, is currently being authored by Sen. John Ensign (R-NV). Ensign, a conservative first elected in 2000 (and up for re-election in 2006), has said he wants to embody "as much free market-thinking" as possible. One major priority for Ensign will be to streamline telecom jurisdictions. In addition to federal regulation from Congress and the FCC, providers also must work within state and local regulatory jurisdictions numbering in the tens of thousands. Ensign wants to address a similar issue in the cable industry, where cable providers (and the telecoms who want to offer similar services) operate under 30,000 local cable franchises.

In the House, Rep. Charles Pickering (R-MS) is heavily involved in drafting companion legislation. Pickering has been particularly concerned with how traditional telecom regulations will be applied to new technologies, such as Voiceover Internet Protocol (VoIP). In the last Congress, Pickering sponsored the VoIP Regulatory Freedom Act, which would have prohibited states from imposing regulations or taxes on VoIP - a potential goldmine of new revenue for the states.

Sen. George Allen (R-VA), also a first-term senator running for re-election in 2006, is widely seen as a leader on technology issues. Not only does Virginia boast a large tech sector, but Allen is widely expected to explore a presidential run, and therefore looking to stake out an issue that helps him gain a national profile. Allen sponsored legislation to extend the Internet tax moratorium (which precluded Internet access taxes by states and localities) through 2007, and has now offered legislation to make the moratorium permanent. Allen is also the author of a bill that would prohibit the extension of the federal excise tax on telecommunications to the Internet.

The federal excise tax itself is an interesting issue. First enacted as a temporary, luxury tax in 1898 for the purpose of funding the Spanish-American War, the FET is now a flat 3 percent federal tax on every phone in America. Congress has attempted to repeal the tax before, most recently in 2000, when repeal passed the House 420-2, but met the veto pen of then President Clinton. In this Congress, Rep. Gary Miller (R-CA) has introduced H.R. 1898 (1898, get it?), which is rapidly gaining cosponsors in the House. Similar legislation in the Senate is expected soon.

One wild card is the uncertainty surrounding the membership of the FCC. The president must nominate a commissioner to fill the vacancy created with the resignation of former Chairman Michael Powell. The other Republican, Kathleen Abernathy, is also expected to leave soon. The nominations are still in the rumor stage. Possible replacements include Ruben Barrales, currently a high-ranking White House official, and Michael Gallagher, an assistant secretary at Commerce. Not only will the FCC be charged with doing Congress' will, but it is faced with several major decisions, including the Verizon-MCI and SBC-AT&T mergers, currently awaiting approval by the commission. Whomever President Bush nominates will have a major impact on the future of telecom regulation.

There are several ancillary issues which may find their way into the telecommunications fray. In 2003, the FCC ignited a firestorm by deregulating media ownership limits, and the reverberations can still be felt within the halls of Congress. Indecency regulation is also a major issue, and Congress may consider proposals to greatly increase indecency fines, or to force cable providers to offer a package consisting only of family-friendly channels.

It is still unclear how all of these issues and players will come together in the end. Whatever happens, it is fair to say that the 109th Congress promises to be a fascinating year for telecom, and what the aforementioned actors do may affect the industry for decades to come.



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