Paul Beckner’s Letter to Members of the House Energy and Commerce Committee in Support of HR 1542, the Tauzin-Dingell, Internet

This letter was sent by CSE President, Paul Beckner to all members of the U.S. House of Representatives’ Energy and Commerce Committee to show CSE’s support for the Tauzin-Dingell bill 1542 — the “Internet Freedom and Broadband Deployment Act of 2001.”

May 4, 2001

Dear Representative:

Your name will be called and your vote will be recorded. On behalf of the more than 280,000 members and supporters of Citizens for a Sound Economy, I strongly urge your support for H.R. 1542.

Regulations intended for a day that has since passed cripple today’s high-tech economy. Over the past year, the tech-industry has witnessed intense, often bankrupting, competition. The NASDAQ has fallen 57 percent from its record high and over $3 trillion in capital has fled equities markets since March of 2000.

The high-tech industry accounted for a third of the nation’s growth in recent years. If the technology sector continues to stagnate, so too will the economy as a whole. Back in 1998 many commentators suggested that part of the reason for the high-tech sector’s success was that it was “one-step ahead of regulators.” No one would risk the embarrassment of saying such a thing today.

The Internet and high-tech sector have been brought to a standstill by a myriad of telecommunications regulations. The inter-LATA data prohibition on the Regional Bell Operating Companies (RBOCS) is a draconian barrier to competition that costs consumers billions of dollars in consumer welfare each year. Universal service subsidies and artificial price caps – both retail and wholesale – have contributed to the high-tech decline as well.

Consumers want broadband, but even more importantly, software, content, and e-commerce firms need consumers to have broadband. Many analysts argue that at least 20 million broadband consumers are necessary to make most ventures profitable. The inter-LATA data prohibition directs investment away from the necessary infrastructure deployment and threatens to extend the high-tech malaise for years to come.

H.R. 1542, “Internet Freedom and Broadband Deployment Act of 2001,” would abolish this barrier to entry and could rescue technology firms from the economic doldrums. The inter-LATA prohibition prevents capital from flowing to its most productive use and retards innovation. H.R. 1542 would correct this imbalance and allow all willing firms to enter a market that requires billions of dollars of investment.

On behalf of CSE’s 280,000 grassroots members, I urge you to vote for passage of H.R. 1542 to modernize telecom regulations to reflect today’s economic realities. I also urge you to reject the baseless claim that H.R. 1542 should not be made law because the Bell companies are “monopolists.”

The Bells do serve 92 percent of all retail telephone lines. However, market share is irrelevant to competition in the telecommunications marketplace. Consumers do not benefit when several competitors serve a single network, they benefit from competition between multiple networks. Retail price caps and universal service subsidies have made it impossible to cover the costs of constructing a rival local phone network, leaving regulators to institute an arbitrage system whereby competitors are encouraged to access the Bells’ exchanges.

But the broadband market is a different story entirely. At the retail level, cable networks compete with telephone, fixed wireless, and satellite networks; long-distance telephone companies compete with Internet Service Providers and other backbone networks in the long-haul data market. Under current regulations, the Bell companies languish in the retail market and have little or Internet backbone.

Regulations force some players – who are able and willing to invest in new infrastructure – to sit on the sidelines.

The Bell’s absence from the broadband inter-LATA marketplace has curtailed investment and slowed deployment at the expense of consumers and the economy as a whole. Things clearly need to change. The time is now and I hope that your position is clear. Vote for H.R. 1542.


Paul Beckner

President and CEO

Citizens for a Sound Economy