Freedomworks Distributes Telecom Report to Capitol Hill

FreedomWorks released Chief Economist Dr. Wayne Brough’s study, Video Programming and Consumer Choice to Capitol Hill, state legislators in key states, its members, and the media this week. [DOWNLOAD .PDF VERSION HERE] The report examines the excessive barriers to entry for new competitors created by today’s system of local franchising for video programming, and how that harms consumers with higher costs through limited competition.

Dr. Brough reviewed the original Communications Act of 1934 and its regulation of telephone and broadcast media as separate industries. The Act was updated in 1996, but still largely treats the voice, data, and video programming industries as exclusive. Current technological advances have opened up cross platform competition as divergent technologies have converged, but outdated regulations have not allowed full entry of these services into the market.

“Despite advances in science and technology over the last 20 years, the high-tech world continues to labor under regulations last updated in 1996, when today’s cutting-edge technologies were not even on the shelves. As a consequence, there is a disconnect between technology and consumer expectations on the one hand, and regulation on the other, with outdated laws hurting consumers by hampering the adoption of new technology,” said Brough.

“This study is more evidence that it is time for sweeping reform, and that reform should not simply apply the old rules to new entrants. Build out requirements for a protected monopoly may have made sense in the past, but in a competitive marketplace, strategic behavior by incumbent companies can thwart the efforts of new providers. It is unclear, therefore, what social policies are furthered by a demand that new competitors also build for the same footprint, especially if existing providers are not extracting monopoly rents…In this case, calling for an equal footprint simply may be an attempt to raise costs of potential rivals rather than a genuine concern for consumer welfare.”

Dr. Brough recommends that Congress enact legislation to reform the old laws and open the market to competition. This would provide consumers the benefits of choice while encouraging the deployment of broadband networks. Dr. Brough also notes that regulated industries act as backdoor tax collectors, and consumers would also benefit form increased transparency of municipal government spending.

To request a copy or to schedule an interview, contact Adam Brandon at 202-942-7698.