Policy Documents

Telecom Unplugged: Ushering in a New Digital Era

Deborah S. Collier and Thomas A. Schatz –
March 11, 2014

In October 2007, Citizens Against Government Waste (CAGW) published Telecom Regulation: Pulling the Plug on Government Interference. The report noted that the rapid deployment of new technology was leaving a bevy of federal regulations over the telecommunications and cable industries in the dust. Today’s converging communications and information technology (IT) environment has greatly enhanced and expanded how people around the world communicate and share information. The rapid adoption of Smartphone technology has enabled people to carry computers in the palms of their hands, and today’s college freshmen are routinely equipped with laptops, cell phones, and tablets. The list of new mobile computing devices grows daily. This report, Telecom Unplugged: Ushering in a New Digital Era, updates CAGW’s 2007 report.

Music and video are no longer limited to the living room but can be enjoyed through a wide range of options, including cable, fiber optic, satellite, and broadband, as well as wireless devices, anywhere at any time. Social media platforms including Facebook, Twitter, Pinterest, and others have become major sources of information sharing. At the 2013 Cable Show, cloud-based video platforms were introduced by Comcast and Time Warner Cable that would provide video programming and storage to consumers. Despite these innovations, the communications industry is still saddled with a regulatory regime that harkens back to the early 1930s and, for common carriers, back to the early days of the railroad industry in the late 1800s.

The Communications Act of 1934 was the first formal attempt to provide regulatory continuity to the growing telephone industry as it began to reach across the nation and connect people thousands of miles away from each other through a copper-wire line. In 1992, the Cable Act was passed in response to concerns that the broadcast industry needed protection when dealing with cable companies. The Telecommunications Act of 1996 further regulated both the telephone and cable industries following the breakup of the Bell companies.

None of those laws foresaw today’s rapidly changing innovative marketplace, nor did they account for any future changes in technology that will greatly expand communications. While the communications industry continues to rapidly evolve, the federal government moves at a snail’s pace to adapt, leaving in place old models governing technology and communications that should no longer apply to modern times. Unfortunately, these obsolete telecommunications regulations are stifling innovation and putting taxpayers and consumers at risk.

In his 1984 book, Burning Money, The Waste of Your Tax Dollars, that summarized the Grace Commission’s findings, Peter Grace described the technological ignorance pervading the federal government. At the time of the book’s publication, the average age of a government computer was 6.7 years; the average computer used by a U.S. business was three years old. Government computer systems were incompatible and required service technicians specifically trained to maintain the outdated equipment. The extra bodies added $1 billion to the federal payroll over a three-year period. Meanwhile, in the private sector, IBM’s General Systems Division updated its computer technology, saving $360,000 in the first six months after installation, and the Boeing Military Airplane Company’s new word processing system saved $483,000 over a nine-month period.

In the 30 years since Mr. Grace published his book and co-founded CAGW with syndicated columnist Jack Anderson, the federal government’s technological ineptitude has persisted. The current telecommunications debates and the federal government’s attempts to regulate the industry are symptoms of larger problems.

From 1989 to 2000, 223 bills were introduced in Congress dealing with some portion of the telecommunications industry; 22 of them, including the Telecommunications Act of 1996, were signed into law. From 2001 to 2010, only 78 such bills were introduced, seven of which became law. The 2012 edition of Title 47, the chapter of the U.S. Code governing the telecommunications industry, now encompasses 3,668 pages. While the private sector speeds ahead with more innovation in response to consumer demand, the federal government lags behind trying to play catch up and fails to see the impact of its policies on taxpayers and consumers.

The telecommunications industry generates approximately $347 billion annually or 2.4 percent of the GDP as measured by output, labor, input, investment and international trade;1 and provides 2 million direct and indirect jobs.2 Yet this innovative and important sector of the economy remains hampered with antiquated laws and regulations.

This paper reviews several areas where government intervention or lack of intervention harms taxpayers and consumers. Topics include the implications of current and proposed Internet tax laws, federally funded broadband deployment, the provision of tools such as spectrum to enable improved communications across the nation, and Internet governance issues in the United States and around the world.