BIOGRAPHIES
F. Duane Ackerman is chairman and chief executive officer of BellSouth Corporation. Mr. Ackerman began his communications career in 1964 and has served in numerous capacities with BellSouth. Mr. Ackerman was named president and chief executive officer of BellSouth Telecommunications, BellSouth’s local telephone service unit and largest subsidiary, in November 1992. He was promoted to vice chairman and chief operating officer of the parent company, BellSouth Corporation, on January 1, 1995, and was elevated to the position of president and chief executive officer of BellSouth on January 1, 1997. On January 1, 1998, Mr. Ackerman was appointed chairman and chief executive officer of BellSouth. In addition to serving as a director of BellSouth Corporation, Mr. Ackerman is also a member of the board of the Allstate Corporation. Mr. Ackerman is the chairman of the national Council on Competitiveness, chairman of the National Security Telecommunications Advisory Committee, a member of the Homeland Security Advisory Council, a trustee of Rollins College, and a former member of the board of governors for the Society of Sloan Fellows of the Massachusetts Institute of Technology.
Robert W. Crandall is a senior fellow at the Brookings Institution, where he has worked since 1978. Mr. Crandall was the deputy director of the Council on Wage and Price Stability during the Ford and Carter administrations. He was also a faculty member at the Massachusetts Institute of Technology and the George Washington University. He has been a consultant to the Environmental Protection Agency, the Antitrust Division of the Federal Trade Commission, and the Treasury Department. His interests include industrial organization, antitrust policy, regulation, competitiveness, deregulation, and telecommunications. He has published widely, and his articles have appeared in journals such as Regulation, the Journal of Economic Perspectives, and the American Economic Review.
Harold Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises, which he founded in 2003. He frequently consults on issues related to the communications sector of the economy. From 2001–2003, Mr. Furchtgott-Roth was a visiting fellow at AEI, where he completed the writing of A Tough Act to Follow (AEI Press, forthcoming), a book about the difficulties implementing the Telecommunications Act of 1996. From 1997 through 2001, Mr. Furchtgott-Roth served as a commissioner of the Federal Communications Commission. In that capacity, he served on the Joint Board on Universal Service. He is one of the few economists to have served as a federal regulatory commissioner and the only one to have served on the Federal Communications Commission. Before his appointment to the FCC, Mr. Furchtgott-Roth was chief economist for the House Committee on Commerce and a principal staff member on the Telecommunications Act of 1996. Earlier in his career, he was a senior economist with Economists Incorporated and a research analyst with the Center for Naval Analyses. Mr. Furchtgott-Roth is a member of the Washington Legal Foundation’s Legal Policy Advisory Board. He is the coauthor of three books: Cable TV: Regulation or Competition, with R. W. Crandall (Brookings Institution, 1996); Economics of A Disaster: The Exxon Valdez Oil Spill, with B. M. Owen et al (Quorum Books, 1995); and International Trade in Computer Software, with S. E. Siwek (Quorum Books, 1993).
Robert W. Hahn is cofounder and executive director of the AEI-Brookings Joint Center for Regulatory Studies and a resident scholar at AEI. Previously, he has worked for the President’s Council of Economic Advisers, Harvard University, and Carnegie Mellon University. Mr. Hahn frequently contributes to general-interest periodicals and leading scholarly journals, including the New York Times, Wall Street Journal, American Economic Review, Yale Law Journal, and Science. Recently, he is the author of Reviving Regulatory Reform: A Global Perspective and the editor of High-Stakes Antitrust. This year he will publish an AEI-Brookings book on the economic analysis of regulation and an edited volume on intellectual property rights in high-tech industries. In addition, Mr. Hahn is cofounder of the Community Preparatory School—an inner-city middle school in Providence, Rhode Island, that provides opportunities for disadvantaged youth to achieve their full potential.
John Mayo is a professor at Georgetown University’s McDonough School of Business. His research has appeared in numerous economics, law, and public policy journals, including the RAND Journal of Economics, the Journal of Law and Economics, the Review of Economics and Statistics, the Journal of Industrial Economics, the Journal of Business, and the Journal of Regulatory Economics. He is coauthor of Government and Business: The Economics of Antitrust and Regulation (with David L. Kaserman, Dryden Press, 1995). Before his appointment at Georgetown University, Mr. Mayo taught at several universities, including Washington University, the University of Tennessee, and Virginia Tech. He has served as chief economist for the U.S. Senate Small Business Committee and as an adviser and consultant to public and private agencies, including the U.S. Department of Justice, the Federal Trade Commission, AT&T, MCI, Sprint, the Tennessee Valley Authority, the Department of Energy, and Oak Ridge National Laboratory. In that capacity, he has participated in a number of regulatory and antitrust proceedings and has testified before state and federal legislative and regulatory bodies on topics including monopolization, price fixing, mergers, and regulatory pricing policy.
Walter B. McCormick Jr. is the president and chief executive officer of the United States Telecom Association (USTA), the nation’s premier trade association representing the converged telecommunications industry. Mr. McCormick first established himself as one of the nation’s leading trade association executives while serving at the helm of the American Trucking Associations. Earlier, Mr. McCormick headed the practice group on Regulatory Affairs, Public Policy, and Legislation at Bryan Cave LLP. Before practicing law, he had a distinguished career in government. Mr. McCormick was nominated by President George Bush as general counsel of the U.S. Department of Transportation, where he served under Secretary Andrew Card. He also served for more than a decade on the U.S. Senate staff. Mr. McCormick was general counsel of the U.S. Senate Committee on Commerce Science and Transportation in the 99th Congress and was Republican chief counsel and staff director of the Committee in the 100th, 101st, and 102nd Congresses. He was responsible for drafting many telecommunications and transportation laws and was identified by Roll Call magazine as one of the fifty most influential staffers on Capitol Hill.
J. Gregory Sidak is a resident scholar at AEI, the F. K. Weyerhaeuser Fellow in Law and Economics Emeritus at AEI, and the president and chief executive officer of Criterion Economics, LLC. He has directed AEI’s Studies in Telecommunications Deregulation since the project’s inception in 1992. Mr. Sidak served as deputy general counsel of the Federal Communications Commission from 1987 to 1989 and as senior counsel and economist to the Council of Economic Advisers in the Executive Office of the President from 1986 to 1987. Mr. Sidak has written five books, including Foreign Investment in American Telecommunications (University of Chicago Press, 1997) and Is the Telecommunications Act of 1996 Broken? If So, How Can We Fix It? (AEI Press, 1999). He has published approximately sixty scholarly articles in journals, including the Antitrust Law Journal, Contributions in Economic and Policy Research, Journal of Network Industries, Journal of Political Economy, Review of Industrial Organization, and Supreme Court Economic Review, as well as opinion essays in the New York Times, Wall Street Journal, and other business periodicals. He is the coauthor of the chapter on remedies and the interface between antitrust and sector-specific regulation in the Handbook of Telecommunications Economics. Mr. Sidak has testified before committees of the U.S. Senate and House of Representatives on regulatory and constitutional law matters.
The Proper Direction for Telecommunications Reform Legislation
Introduction
On December 14, the AEI-Brookings Joint Center hosted a conference on telecommunications regulation. Almost nine years have passed since the Telecommunications Act of 1996—the first major congressional overhaul of telecommunications law in almost sixty-two years. The provisions concerning competition for local telephone services have been especially controversial. Given the likelihood that Congress will soon revisit telecommunications legislation, this conference inaugurated a new series on the future of American telecommunications by asking how Congress should best proceed with reform.
Robert Crandall, Brookings Institution
Mr. Crandall summarized a chapter from his forthcoming book on telecommunications regulation that analyzes the economic impact of 1996 Act’s mandate to unbundle local telephone services. He explained that unbundling was intended to promote competition by requiring large, potentially monopolistic local phone companies to share their infrastructure with new entrants at regulated rates, thereby lowering prices, encouraging innovation, and improving productivity. Once competitors entered the market using shared facilities, they would then invest in their own facilities, further contributing to competition in the industry.
Mr. Crandall argued, however, that expectations have proven incorrect and that the costs of implementing the unbundling provisions have far outweighed the benefits. He noted that local telephone rates have stayed about the same, or in some cases even increased, since 1996, implying a wealth transfer from incumbent providers to new entrants with no downward pressure on prices and little innovation. Furthermore, the Act reduced incumbents’ incentive to invest in their own networks by forcing them to share the returns with other companies.
Mr. Crandall acknowledged that some studies have shown slight consumer savings, up to fifteen percent, from the entrance of competitive local exchange carriers (CLECs) into the market. But he pointed out that at least part of these gains came from long distance services not subject to unbundling requirements, and that these improvements do not cover the social cost of over $8 billion per year to comply with the 1996 regulations. In the end, Mr. Crandall maintains, competition from CLECs using incumbent lines is artificial. CLECs provide essentially the same service as the original carriers with little, if any, reduction in consumer rates and high social costs. The 1996 Act has thus reduced, rather than increase, welfare.
John Mayo, Georgetown University McDonough School of Business
Mr. Mayo agreed that the 1996 bill had not fully achieved its goal of promoting competition in local telephone service markets. Rather than join Crandall’s call to abandon unbundling requirements altogether, however, he argued that three aspects of regulations stifled innovation and the desired price reductions: First, he criticized universal coverage policy as inefficient in the way it raises revenues and the way it distributes subsidies, resulting in significant welfare losses. Second, he objected to the current system of subsidized network access pricing as distortionary, emphasizing that prices must be more cost-based in order to better facilitate competition. Third, he recommended that legislation include stronger antitrust liability provisions to discourage monopolistic behavior by incumbent providers. Mr. Mayo finished by suggesting that the fact that a large number of consumers switched to competitors undermines Mr. Crandall’s argument that there was little gain to consumers and that he may have overlooked some costs associated with the political economy of the old regime, such as rent-seeking and lobbying.
Harold Furchtgott-Roth, Furchtgott-Roth Economic Enterprises
Mr Furchtgott-Roth agreed that unbundling policy had not brought the expected level of competition, but he reminded the audience that few economists had criticized the legislation when it was passed. He did not dispute Mr. Crandall’s general argument that the economy had suffered significant costs in implementing the regulation, though he suggested that there may have been more gains to business, if not consumers, than Mr. Crandall allowed. He also speculated that the problem with the law may be one of implementation as much as content, and that a better approach by the FCC could help the situation. Lastly, he attributed the economic failure of the CLECs at least in part to the complex and uncertain nature of the regulatory environment.
Walter B. McCormick Jr., United States Telecom Association
Mr. McCormick began by emphasizing the importance of the communications industry to everyday life and lamenting the ranking of the United States as thirteenth in broadband penetration in the world. He attributed the low ranking directly to a lack of investment resulting from overregulation. He asserted that the communications industry was competitive with a range of choices for consumers and that government involvement hampered innovation and productivity. In particular, he expressed discontent with telephone unbundling regulations, noting that such heavy-handed government involvement in such a narrow sphere of an industry is rare or nonexistent outside of telecommunications.
Question and Answer
Mr. Crandall and the panelists responded to a number of questions from audience members and from the moderator, Mr. Gregory Sidak of AEI. Crandall countered contentions that unbundling had not hurt the thriving telecommunications industries in Japan or South Korea by calling attention to the differences in operating environments—Korea achieved widespread subscription before unbundling was implemented, and Japan did not possess an extensive cable network as an alternative source of high speed communication.
The panelists each gave their opinions on universal municipal WiFi service. Mr. Furchtgott-Roth argued that the market for Internet access and broadband is competitive and that there is no need for the government to provide it. Mr. McCormick agreed and added that large investment requirements are not in themselves barriers to entry. Mr. Sidak suggested that local government utilities’ prices could ultimately be viewed as predatory, making them targets for antitrust suits. Mr. Mayo was more optimistic about government-provided service, suggesting that a municipality should be allowed to compete with the private sector if its citizens elect to do so.
Mr. Crandall rejected criticisms that his analysis may have underestimated benefits to consumers and businesses resulting from the unbundling measures. He maintained that the lack of increase in demand for phone lines was an observable fact. While conceding that productivity and innovation may have been marginally improved, he reiterated the lack of supporting evidence for either and maintained that even if such benefits existed they were heavily outweighed by the costs incurred by the legislation.
Keynote Address
Bellsouth Corporation, F. Duane Ackerman
Mr. Ackerman focused on the history of the Telecommunications Act of 1996, his view of the bill’s shortcomings, and improvements that could be made in new legislation. He argued that communications policy has only a loose connection to reality, damaging consumers, investors, and the economy. He stressed the importance of communications to a vast range of products, services, and security needs and deemed it unacceptable for the United States to be so far behind other developed countries in broadband penetration. He echoed earlier arguments that communications is a competitive industry offering several options and that regulation hinders investment and innovation.
Ackerman described his vision for new telecommunications legislation in terms of two general goals: The first is increasing competition and decreasing regulation. He conceded that some basic regulations would remain but called for a phasing out of unbundling requirements, as well as more equitably distributed support for social responsibility services such as emergency and disabled communication access. His second major goal is improving the universal coverage mechanism. He conceded the public has come to expect universal service, but argued that the current system is unraveling requires overhaul. He recommended that the costs of universal coverage be distributed more evenly and fairly, supported in part by general tax revenue. Ackerman reiterated his belief that reducing regulation and revamping universal coverage would cut unnecessary social costs and yield significant economic gains.
AEI-Brookings Joint Center Research Assistant Jesse Gurman prepared this summary.
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