Regulating Regulations

By eweek  |  Posted 2001-12-10

The PR blitz to unshackle Baby Bells ratcheted up last week when a free-market think tank, the Progress and Freedom Foundation, sent out a letter signed by eight prominent economists urging Cabinet officials and the president to drop regulations imposed by the Clinton administration.

The Tauzin-Dingell legislation would free Baby Bells from selling wholesale services to rivals at cost. Advocates argue that Baby Bells have little incentive to build out network infrastructures if they have to let rivals use them.

Baby Bell ambivalence, in turn, has dampened IT spending, which, according to the Department of Commerce, will decline 15 percent this year. Freer Baby Bells would rev sales of networking gear, according to the PFF.

On the other side of the fence are cable companies such as AT&T and AOL Time Warner, along with small phone companies that sprung forth from telecom deregulation enacted in 1996. The latter group, due to tight capital markets and less-than-harmonious relationships with Baby Bells, is in a virtual state of collapse. AT&T has also struggled.

The act would undo the work of former FCC commissioners Reed Hundt and William Kennard, who made sure Baby Bells could not leverage their monopolies in local data markets. Kennards and Hundts No. 1 priority was to ensure small local phone and data service providers would not be shut out or summarily crushed by Baby Bells.

If you dont work for a cable or phone company, Tauzin-Dingell breaks down purely along ideological lines. Just listen to PFF President Jeff Eisenach: "The industrial policy experiment that Reed Hundt and Bill Kennard conducted was a massive failure." Eisen-ach envisions mostly large companies dominating the broadband and data services market. Ideally, each home and business would be fed by competing copper, fiber and cable pipes.

This position primarily takes in market and business realities. And no matter what happens, smaller companies arguably dont have deep-enough pockets to play the phone and data game.

Kennards perspective (his FCC stint ended June 30) is altogether different and best summed up in a statement on his Web site: "The New Economy must be defined, first and foremost, by its power to unlock the potential of all of our people—by its power to educate our poorest children, to empower people with disabilities, to uplift rural and inner city communities, and to repair and revitalize the fabric of our communities."

Its a classic battle of the big guy vs. the little guy.

The House may soon pass the bill, but it faces opposition in the Senate and possibly the White House. Which side are you on? Write me at

Rocket Fuel