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Chapter 16
Regulation: Issues Without Answers

Order marches with weighty and measured strides; disorder is always in a hurry.

—Napoleon Bonaparte Maxims 1804-1815

Regulations, from Latin regula meaning rule, are rules or orders established by governmental bodies and having the force of law. As generally is the case in matters of government, regulations are not developed quickly. Like standards, they develop slowly, based on human experience and setting the stage for the next cycle of experience. Generally written by groups of lawyers, they are characteristically lengthy and complex to the extent that it takes other groups of lawyers to interpret them. Where there are disagreements or disputes, lawyers appeal to the regulators and all too often litigate those matters through the court systems. As noted by Karl Shapiro in Reports of My Death (Algonguin, 1990) "Lawyers love paper. They eat, sleep, and dream paper. They turn paper into gold, and their files are colorful and their language neoclassical and calligraphically bewigged…" While current regulations are available electronically, as well, the size of the files to be downloaded reflect the size of the official paper documents. (Author’s Note: At the time of this writing, regulatory changes are occurring with unprecedented speed in the U.S. The Telecommunications Act of 1996 currently is in the process of interpretation by the FCC, which is setting implementation rules at this very moment. Characteristically, such laws and rules will be challenged in the courts. Therefore, the views and opinions stated in this chapter are subject to change.)

This chapter isolates discussion of recent developments in U.S. regulation, as well as pending regulatory issues. I will focus on the Telecommunications Act of 1996 (The Act), and how it will shape the future of communications in the United States. Also discussed will be issues of decency, rates and tariffs, and number portability. Information relative to The Act and other regulatory and legislative information may be obtained from the FCC and Congress over the Internet as follows:

  World Wide Web: http://www.fcc.gov
  Gopher: gopher.fcc.gov
  FTP: ftp.fcc.gov (log in as anonymous, using your e-mail address as your password)
  House of Representatives: http://thomas.loc.gov
  Senate: gopher://ftp.senate.gov

Regulations tend to build on one another, for without the experience of history the future tends to be a bit uncertain. Over time, a complex fabric of regulation has been woven at the international, national, state and local levels. While the seams generally are well-stitched, there are significant overlaps in some cases and the patterns don’t always match up right. In the United States, the weave of the fabric traditionally has been very tight and has covered the body of communications from head to toe. The clear trend is one of a much lighter and much looser weave, and lesser coverage; in other words, deregulation. As deregulation takes hold and competition heats up, comfort and freedom of movement become increasingly important. The risk, of course, is that those unused to the full sun of a competitive environment (read LECs) may suffer from sunburn for a short time. Those same companies would claim to have sharpened their market skills in the cellular radio market over the past 10 years or so; as with all things, time will tell.

Full deregulation, however, is unlikely. At the risk of stretching the fabric analogy to the ripping point, the telecom world of New Zealand is completely nude. Some years ago (late 1980s), the government completely deregulated telecommunications, abolishing the regulator in the process. As a result, any legal disputes among carriers must be addressed through the courts, as with any other commercial civil dispute. Over the years, the carriers have engaged in several such disputes. The issue of interconnection, for instance, worked its way through the entire national court system and then was appealed to the Privy Council in England for final resolution. As one might expect, no other nation has taken deregulation quite to this extreme.

For the most part, the U.S. sets the regulatory model for the rest of the world. This has been the case traditionally, and continues to be so, with notable exceptions like that of New Zealand. Following the U.S. lead, CPE and long distance competition has been introduced in much of the world, and regulation generally has been relaxed in favor of allowing market forces to determine which products and services will find success, and at what prices. A great many nations have privatized their government-owned networks, either completely or partially. Numerous others have plans in that regard, including Australia, Germany, Italy, Korea, Spain, Thailand, and Turkey. In some cases, the proceeds of privatization have been earmarked for specific purposes such as education. Table 16.1 provides a chronology of selected key regulatory and legal events in telecommunications history.

Table 16.1 Summary of selected key regulatory and legal events in telecommunications history

Year Event

1865 ITU (International Telegraph Union) created. Later forms CCITT (now ITU-T) to set standards for international connectivity of telegraph networks (later, telecommunications and radio, as well).
1876 Alexander Graham Bell granted patent for telephone.
1910 Mann-Elkins Act grants Interstate Commerce Commission (ICC) interstate regulatory authority.
1913 Department of Justice (DOJ) considers antitrust action against Bell System, based on commitment by President Woodrow Wilson to break up monopolies.
1913 Kingsbury Commitment causes DOJ antitrust action to be dropped in return for AT&T’s agreement to interconnect with independent telephone companies, stop acquiring them, and divest its stock in Western Union.
1918 Post Office assumes interstate regulatory authority for telephone and telegraph by executive order of President Wilson.
1921 Graham-Willis Act establishes telephone companies as natural monopolies.
1927 Radio Act of 1927 establishes Federal Radio Commission to regulate all radio spectrum except bands owned by federal government.
1934 Communications Act of 1934 establishes Federal Communications Commission (FCC) to regulate interstate, international, and maritime communications, with universal service stated as the goal. DOJ begins major antitrust action against Bell System, which is delayed due to issues of national interest during WW II.
1935 First state Public Utility Commissions (PUCs) formed to assume intrastate regulatory authority from municipal and city governments.
1945 Supreme Court rules in Ashbacker Radio Corporation versus the FCC that radio spectrum allocation is to be on the basis of comparative hearings.
1949 DOJ files antitrust action against AT&T, which action had been delayed by WW II. This action results in 1956 Consent Decree.
1955 FCC’s Hush-a-Phone Decision supports AT&T’s contention that even acoustically-coupled foreign (non-telephone company provided) devices cannot be connected to the network without special arrangement.
1956 Consent Decree negotiated as settlement between AT&T and DOJ, allowing AT&T to retain ownership of Western Electric if it manufacturers only for Bell companies. Also prevents Bell System from offering data processing services and other services not related to functions of a common carrier. Requires that Bell System patents be licensed to others on basis of reasonable fees.
1959 FCC’s Above 890 Decision grants private microwave access to a dedicated portion of radio spectrum. Also allows construction of such networks, regardless of economic impact on the established common carrier.
1962 Communications Act of 1962 places authority with FCC to assign commercial satellite frequencies. Act establishes Communications Satellite Corporation (Comsat) to act as a carriers’ carrier (wholesaler) for international satellite service and in conjunction with Intelsat. Intelsat (International Telecommunications Satellite Organization) established as international financial cooperative which owns and operates satellites for international communications.
1963 Microwave Communications Inc. (MCI) files application to operate as a Specialized Common Carrier (SCC).
1968 FCC’s Carterphone Decision counters Hush-a-Phone decision, allowing interconnection of foreign equipment through standard protective coupling device provided by telephone company.
1971 FCC’s SCC Decision clears way for MCI and other SCCs to construct and operate networks.
1972 FCC’s Domsat Decision allows domestic satellite market. AT&T excluded from market for three years.
1975 FCC establishes Part 68 registration program for certification of foreign equipment, eliminating requirement for coupling devices.
1978 FCC’s MTS/WATS Decision allows MCI and others to offer switched MTS voice services.
1980 Second Computer Inquiry (Computer Inquiry II) requires AT&T to offer enhanced communications and CPE/DTE through separate subsidiary.
1982 Modified Final Judgement (MFJ) negotiated between DOJ and AT&T as a modification to 1956 Consent Decree. MFJ forces divestiture of Bell Operating Companies (BOCs) and establishes equal access. Also removes restrictions on AT&T against computer and related businesses. AT&T retains Long Lines (long distance), Bell Telephone Laboratories (R&D), and Western Electric (manufacturing). AT&T retains embedded CPE base. AT&T files reorganization plan with Federal District Judge Harold H. Greene.Congress grants FCC authority to award radio spectrum licenses on basis of lottery, rather than comparative hearings. Cellular radio licenses are granted on this basis.
1983 Judge Greene files order based on AT&T reorganization plan. Order specifies 7 RBOCs, with Bellcore for common R&D support. LATAs established, with AT&T and other IXCs allowed to provide interLATA service. BOCs and other LECs allowed exclusive rights to provide local and intraLATA long distance services.
1984 MFJ takes full effect January 1.
1985-1996 MFJ relaxed through series of waivers allowing RBOCs to offer enhanced services such as voice mail. Several PUCs allow IntraLATA and local competition.
1993 Omnibus Budget Reconciliation Act provides for creation of a new class of wireless services, PCS. FCC authorized to auction PCS spectrum.
1994 First PCS auctions held, raising $8.3 billion.
1996 Telecommunications Act of 1996 passed by Congress, allowing full and open competition across all dimensions, including manufacturing, local service, and long distance. Conditions established for RBOC entry into long distance market within home states. FCC begins process of establishing rules for implementation of act. Implementation specifics in process of full definition; ultimate impact remains unclear.
Communications Decency Act enacted to hold responsible creators of content and service providers both responsible for access of minors to indecent or offensive material over the Internet. The act was ruled unconstitutional, in violation of free speech guaranteed by the First Amendment. DOJ is expected to appeal to the Supreme Court.

Source: See [16-1], [16-2], [16-3], [16-4], [16-5], and [16-6].


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