Solicitor General’s Decision Sends Signal that Markets, Not Regulators Should Shape the Future of Telecommunications

Citizens for a Sound Economy (CSE) applauds the Solicitor General’s decision not to appeal to the Supreme Court a recent decision by the District Court of Appeals for the District of Columbia. The District Court of Appeals rejected the Federal Communications Commission’s regulations that govern competition in the telecommunications sector. The sharply worded decision found the regulations a major impediment to creating a competitive marketplace. CSE supports the position of the District Court, and today’s decision by Solicitor General Theodore Olson reaffirms the lower courts’ efforts to replace the FCC’s managed competition model with real competition. This is good news for consumers and good news for innovation.

The transition from a world of regulation to a world of competition has been challenging, as the eight years following the 1996 Telecommunications Act have made clear. Although an attempt to promote competition, the Act spawned an era of continued regulation and managed competition that more closely rivaled Soviet planning than anything like true competition. Companies were forced to share equipment with their competitors at regulated rates that made it difficult to recoup costs. Consequently, incentives to invest declined, and consumers have suffered as the broadband economy has been put on hold by outdated regulations.

CSE’s Chief Economist, Wayne T. Brough, Ph.D., made the following comments:

“For consumers, the decision against an appeal offers the opportunity for renewed growth in telecommunications and new choices in the marketplace. While some who enjoyed artificially low rates may claim consumers will suffer without the appeal, renewed competition will force businesses to compete for customers. With wireless and web phones gaining a greater share of the market, competition for our business will be brisk. This keeps prices in check and innovation in high gear. Consumers win and the potential for widespread broadband deployment brings the next generation of communications within the reach of all consumers.

“America has been lagging in the adoption of this important new technology—we currently rank only 11th in the world in broadband deployment. Clarifying the rules and removing regulations that distort the market will allow this market to develop, generating new opportunities for growth and employment while offering consumers access to the latest technologies.

“CSE is leading a nationwide grassroots educational campaign that calls for deregulation of America’s telecommunications markets. Today’s decision by the Solicitor General is an important step towards the goal of real competition.”

Dr. Brough is available for additional comment via telephone 202-942-7627 or by email at wbrough@cse.org .