The Law of Unintended Consequences

Whether intentional or not, the 1996 Telecommunications Act ("1996 Act") was transitional legislation, focused largely on the constituencies that battled before Congress at the time of its passage, with compromises to address historic realities. Many provisions central to the 1996 Act were carrots extended to the major players to support (or at least not to oppose) the legislation. (1) And Congress failed to seize that unique opportunity to fundamentally restructure our communications systems in light of the Internet. That was probably a good thing, given the law of unintended consequences. To be sure, the 1996 Act has lofty, enduring principles--competition deregulation and universal service--but the tough choices that would underpin achievement of those principles were intentionally left vague as Congress punted to the Federal Communications Commission ("FCC") to resolve those sticky issues. Congress intended the 1996 Act to be a catalyst for the expansion of competition in the telecom and cable services markets, both of which had a history of monopoly providers. The efforts to induce competition in the telecom sector by opening up the RBOC monopoly network to its competitors were valiant and expensive, but largely ineffectual. The provisions freeing the RBOCs to offer video services under their choice of regulatory silos--cable, wireless, common carrier, or a new open video system--produced very few video systems, and most of those that were created were later shut down or sold by the RBOCs merging with their siblings. The 1996 Act was beneficial in some respects. Telecommunications prices dropped, and the variety of services available to consumers expanded. It created the mechanism--the universal service provisions (2)--through which over ninety percent of the classrooms in the Nation's schools have been connected to the Internet. And to speed deregulation, the 1996 Act gave the FCC new tools, including forbearance, regular comprehensive regulatory reviews, and preemption of state regulation. The 1996 Act was also flawed, both as drafted by Congress and implemented by regulators and the courts. The statute was riddled with ambiguities, (3) and many courts failed to give appropriate deference to reasonable interpretations by the expert agency, thereby leading to years of unnecessary litigation. (4) It did not adequately anticipate the popularity and uses of the Internet, leaving many tricky structural issues for much later resolution. (5) It went too far in loosening traditional constraints on media consolidation, especially radio ownership. Its mandatory biennial review of all broadcast rules imposed an impossible regulatory burden on the agency, (6) requiring the FCC to revisit its rules before the ink had dried on earlier changes. And it failed to provide the clarity of vision and corresponding legal authority for the FCC to take ownership of the digital television transition. In some respects, the 1996 Act is given too much credit for things that were happening with or without this legislation. It was a 1993 statute that led to the allocation of spectrum for Personal Communications Services and the auctions that followed, raising billions of dollars for the U.S. Treasury and--more importantly--triggering the wireless competition that has driven a sevenfold increase in the number of subscribers in just ten years. (7) It was the authorization of direct broadcast satellite ("DBS") a decade earlier that, in the late nineties, made the two leading satellite providers established competitors to cable companies. And it was technology and the Internet, not the 1996 Act, that accelerated the rollout of Wi-Fi and Wi-Max, as well as the use of mobile phones, MP3s and other personal entertainment devices to compete with broadcasting, broadband access, and wireline telephony. By the same token, the 1996 Act too often is blamed for developments it did not cause. The decline of long distance as a discrete service was already underway by the time of the 1996 Act, and it was hastened by the demise of both WorldCom and AT&T for very different reasons. …