Spectrum Matters: Nearly 25 Years Later, Telecom Act Still Consequential, but Not As Much as Internet

Even the biggest innovations in communications are not as consequential for the whole of the economy or society as we might believe, as vital as they are for participants in the industry. That noted, few technology or policy innovations are massively consequential for whole societies and economies.

Still, some innovations are hugely consequential for participants in the connectivity business, leading to whole segments of the industry disappearing, new entrants rising to dominance and business models radically changing.

The authors of the Telecommunications Act of 1996 believed the “goal of this new law is to let anyone enter any communications business -- to let any communications business compete in any market against any other.” The Act was expected to affect all firms in the telecom business, and arguably succeeded in that respect.

The Act primarily was intended to affect telephone service--local and long distance, cable programming and other video services. In the sense of promoting competition, the Act succeeded.

But the Act did not anticipate the internet. And it would be difficult indeed to make the case that anything in communications approaches the impact of the internet, even as connectivity is fundamental.

To be fair, the Act only intended to create more competition in communications services. It did not aim specifically to create space for broader innovations.

It goes too far to argue that the Act was akin to rearranging the deck chairs on the Titanic. but a reasonable person might argue something along those lines, considering the most impactful innovations since 1996, which are almost all related more to the emergence of internet applications and services than “communications” competition.

A logical fallacy is an error in reasoning. And while it might not be entirely fair to make the analogy, connectivity competition has been far less transformative or disruptive than convergence.

It happens all the time. The Ad Hominem Fallacy is that someone is wrong about something because of who they are. The problem there is that a fact is a fact, no matter “who” says it.

Probably most common in the area of public policy is the “causal fallacy,” where there is correlation but not causation. As economists disagree about the outcomes produced by any specific policies, so public policy about communications often is underpinned by a set of assumptions that might, or might not, be correct.

That was partly proven correct. Many expected that the most important new competitors for the local telecom companies were AT&T and MCI Communications, the two giants of the long distance business.

What framers did not foresee was that demand for fixed network voice would begin to decline within four years of the law’s passage.

And it is likely nobody foresaw that both AT&T and MCI actually would be purchased by the local telcos they were supposed to compete with, SBC Communications buying AT&T and Verizon getting MCI.

Though some smaller independent companies did emerge, the biggest national competitors to the telcos were the cable TV companies, which most likely expected would be competitors, but probably few believed would be the major beneficiaries of deregulation.

Few likely expected cable companies would emerge as the dominant suppliers of broadband services.

Any single policy or action with a proposed outcome assumes a simple cause-effect relationship we cannot isolate from all the other uncontrolled circumstances that might plausibly contribute to the stated outcome.

We might have a cause-effect relationship that argues “quality broadband leads to economic development,” but we have no way to verify that relationship. It is equally plausible to argue different cause-effect relationships.

Perhaps related is the “hasty generalization,” a general statement without sufficient evidence to support it. The commonness comes from the complexity of any issue or problem to be solved. If you have spent any time working on the problem of “homelessness” or “economic development” you realize fairly quickly how complicated any proposed permanent solution must be.

As helpful as the Act has been, it has been marginally responsible for the internet revolution that now has subsumed the entire connectivity industry within the new ecosystem. Connectivity is necessary, but most of the value is generated by others supplying devices, apps, content or platforms.