Letter to Senate on Broadband Regulatory Parity Act

This letter was sent by CSE President, Paul Beckner to all members of the U.S. Senate to show CSE’s support for S. 2430 — the “Broadband Regulatory Parity Act of 2002.”

May 5, 2002

Dear Senator:

While the economy is showing signs of recovery from the brief recession of 2001, the technology sector remains mired in a two-year old depression. While speculation and easy credit deserve some of the blame for the overcapacity that has led to deflationary pressure and debt defaults, regulatory policy has artificially constrained data traffic growth, which has crippled the sector.

Thankfully, Senators John Breaux (D-La.) and Don Nickles (R-Okla.) have introduced S.2430, the “Broadband Regulatory Parity Act of 2002,” to correct the regulatory failings that stand in the way of a recovery. On behalf of the nearly 300,000 members and supporters of Citizens for a Sound Economy, I strongly urge you to cosponsor S. 2430.

This bill would eliminate the asymmetric regulation that has penalized investment and undermined competition in the high-speed Internet, or broadband, market. Currently, Digital Subscriber Line (DSL) technology is subjected to the same common carrier regulations as local telephone service, while cable modem service is essentially unregulated. Sens. Breaux and Nickles’ bill would level the playing field by relieving DSL providers of some of the most harmful regulations they currently face.

Although the economy surged by 5.8 percent in the first three months of this year, most of the growth came from a dramatic increase in government spending and a slowdown in inventory liquidation. Business investment – the key to the historic growth of the late 1990s – fell for a fifth consecutive quarter and consumption fell by two percent from the previous quarter. All is not well. Policymakers need to take positive steps to eliminate the disincentives that penalize investment and serve as an impediment to growth.

Sens. Breaux and Nickles bill would do precisely that. Ubiquitous broadband deployment would be a tonic for our economic ills, but companies will not commit private risk capital to such projects if they cannot profit from them. This bill would eliminate regulations that force incumbent telephone companies to socialize their assets and treat their broadband offerings similarly to those of cable companies.

Cable broadband has a 2-1 edge in subscribers and is insulated from market pressure to improve and market its service. Incumbent phone companies have the cash flow and access to debt markets to invest in a new generation of services for consumers. All Congress has to do is eliminate the regulatory obstacles in their way.

Proceedings are currently underway at the Federal Communications Commission (FCC) to recalibrate current regulations in light of their failure to spur investment on the local loop. Passage of S. 2430 would give the FCC a better sense of what direction policymakers in the Senate would like to take broadband regulation and provide a roadmap for the Commission to follow.

Any change to a regulatory structure will provide greater benefits to one industry segment over another. But the Breaux-Nickles bill would reconcile this problem in broadband regulation once and for all by simply requiring that regulations for one delivery technology be the same for others. At the retail level, cable, telephone, fixed wireless, and satellite companies offer essentially the same services and compete for the same consumers. Yet today’s regulations treat these companies differently and create regulatory arbitrage opportunities where businesses prefer to invest in lobbying rather than productive assets. S. 2430 would treat all competitors equally and fairly and benefit consumers by forcing these companies to compete in the marketplace, rather than in Washington.

CSE strongly encourages you to end the inside-the-beltway telecom wars, offer a life-line to the depressed technology sector, and spur consumer broadband deployment by cosponsoring and offering full support for S. 2430.

Sincerely,

Paul Beckner

President and CEO

Citizens for a Sound Economy