22 June 2006

Telecommunications Act of 1996 (Part 1)

(Table of Contents)

For many years, radio and television were governed by the Communications Act of 1934. During this time, repeated modifications and legal judgments altered the effect and purpose of the legislation. For example, in the early years of its operation, the FCC (a product of the act) was preoccupied with regulating the content, including the political content, of broadcast licensees. By 1996, the staff of the FCC devoted to content matters was as large as it had been in 1934, yet there were fifty times as many licensees.

For a discussion of the Telecommunications Act of 1996 (TCA-96), it is useful to look at the philosophy of the drafters. From the point of view of an admirer,
Economides: The 1996 Act envisions a network of interconnected networks that are composed of complementary components and generally provide both competing and complementary services. The 1996 Act uses both structural and behavioral instruments to accomplish its goals. The Act attempts to reduce regulatory barriers to entry and competition. It outlaws artificial barriers to entry in local exchange markets, in its attempt to accomplish the maximum possible competition. Moreover, it mandates interconnection of telecommunications networks, unbundling, non-discrimination, and cost-based pricing of leased parts of the network, so that competitors can enter easily and compete component by component as well as service by service.

The 1996 Act imposes conditions to ensure that de facto monopoly power is not exported to vertically-related (complementary) markets. Thus, the Act requires that competition be established in local markets before the incumbent local exchange carriers are allowed in long distance service.

The Act preserves subsidized local service to achieve "Universal Service," that is, the provision of basic local service to the widest possible number of customers. However, the Act imposes the requirement that subsidization is transparent and that subsidies are raised in a competitively neutral manner. Thus, the Act leads the way to the elimination of subsidization of Universal Service through the traditional method of high access charges
This was the technology of regulation side of the legislation; content regulation was mostly covered under the Communications Decency Act (CDA), Title V of TCA-96. The CDA regulated internet content, which was problematic since the actual subject of the regulation in this case would be internet service providers (ISPs) or web hosting services. The former are exempt from liability for indecent/obscene content from 3rd parties (e.g., if I post something vile at my other blog, and your child accesses it through AOL, AOL is not liable). Oddly, efforts to prosecute spammers (including obscene spammers) and phishers have not been consequential although most spam originates from a small number of US-located servers. This seems like it would be an uncontroversial use of FCC resources. The CDA did allow ISPs complete permission to block sites they deemed risky; an ISP with a strong political motives could presumably have chosen to block domains associated with views the proprietor found objectionable. I am not aware of legal challenges to this. As for the rest of the CDA, indecency provisions have been struck down. Action against non-internet communications providers have been comparatively rare, despite the increasing tendency for prurient advertising.

According to Economides, the TCA-96 responded successfully to a new dimension of the TCIT industry, that of greatly enhanced competition. For example, the networks now were against the ropes in their competition with cable; cable also competed with local carriers and wireless for broadband internet. The main industry opposition to the TCA would have been the incumbent local exchange carrier (ILEC), or service connecting the telephone user to the global network of telephony. This sector was exposed to new and direct competition from longer-distance providers.

Among the most decisive changes wrought by the TCA-1996 was a lifting of prohobitions on further consolidation of media firms, another concession to the putative reality of increased competition of media.

(part 2)

phishing: a scam that involves sending gigantic numbers of email to people purporting to be from some financial services firm and requesting they respond with financial information such as their account user name and password. Only a small percentage of those who receive such messages will even open them, let alone take the bait, but the amount lost to fraud is large (About $1 billion annually; Wiki). Not related to the 1980's band Phish.
Sources for this post:
Wikipedia, "Telecommunications Act of 1996"

"The Telecommunications Act of 1996 and its Impact," Nicholas Economides, September 1998

Oligopoly Watch, "Oligopoly brief: Clear Channel," July 12, 2003; "Industry brief: US phone industry (Part I)," December 13, 2003; "Phone concentration," August 03, 2004

Text of Law (1996)

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