New Tech, Old Regs

Breathtaking technological progress over the last two decades in the telecommunications industry has far outpaced government regulators' ability to keep up. The lines separating one sector from another are rapidly disappearing.

Different technologies - computers, television, cable, and phone service - are all heading toward the same end point. You can watch movies and speak with friends on your PC. You can listen to a radio broadcast of your favorite sports team over the Internet from anywhere. You can log on to the Web using your TV.

Both cable TV and new high-speed digital subscriber telephone lines (DSL) can bring you digital telephone and Internet service. Cellular and digital phones are rapidly making inroads against local phone companies - and more competition is coming in the local market.

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Federal regulators are often left bringing up the rear. Their goal is to protect competition, so that the public has ample access to technology at lower prices. But with technology's advances, deciding what's anticompetitive is a very subjective, even speculative, call. There's no way to predict where the market is headed.

A great deal of concern currently centers around AT&T's purchase last year of cable powerhouse Tele-Communications Inc. (TCI). Some worry it will allow AT&T to dominate access to the Internet over broadband, or cable. Right now, Internet service providers who want to use AT&T's Excite@Home high-speed cable service must pay a fee, while AT&T does not.

The Federal Communications Commission is rightly taking a hands-off approach, waiting to see how the market develops. After all, the DSL lines mean cable isn't the only way to get high-speed Internet access.

But a bill in Congress would force AT&T to "open" its cable to all Internet comers. Rival GTE Corp. has filed an antitrust suit against AT&T. America Online wants the federal government to step in and mandate open access.

In addition, local governments in Oregon and Florida are mistakenly trying to force AT&T to do so. It's one of those things that sounds good, but it would lead to regulatory rate-setting, exactly the wrong direction to go.

Ironically, GTE itself is about to combine with Bell Atlantic, a regional phone company. That merger, along with the completed Southwestern Bell-Ameritech fusion and that of MCI-Worldcom Inc., will result in three large, national companies capable of competing with AT&T in the broadband Internet-access market and elsewhere.

But provisions in the 1996 communications law prohibit the Baby Bells from transmitting voice or data long-distance until they open their markets to competition for local phone service. And some regulators want to put conditions on the mergers.

The regulatory system is tripping over itself, with potential harm to competition and consumers.

Elsewhere, critics decry the lack of competition in the cable TV industry. But digital satellite TV, which could compete with local cable monopolies, is hindered from effectively doing so because by law it still cannot carry local TV broadcasts. Congress has had a tough time fixing the problem, although a bill could emerge as early as this week.

The regulatory approach that will best foster competition, innovation, and lower prices for consumers should include these elements:

*Regulators need a broader definition of the market. Antitrust actions tend to take the narrowest view possible. Consumers want services, not separate industry sectors. For example, they want high-speed Internet access and don't care if it's over cable or DSL lines. They don't necessarily care if they go online with a PC or Web TV.

*Continue heading towards deregulation, moving away from regulated prices as local phone service becomes competitive. Allow regulated local phone companies to charge what the market will bear for already competitive services such as Internet access.

*Focus on eliminating legal and bureaucratic red tape so market forces can operate. Regulators will still be needed to monitor the marketplace and step in when it cannot arrive at the best solution - say, in handing out broadcast frequencies, developing common industry standards, and ensuring provision of universal service.

Companies must also stop seeking to use bureaucracy and Congress to stave off competitors. It's time for competition, not regulation and monopoly management, to govern tele-communications. Consumers will be better off for it.

(c) Copyright 1999. The Christian Science Publishing Society

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