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CHAPTER IV - A New Telecommunications Act

The conference participants also considered the prospects for a major revision of communications law. It has been exactly two decades since the last major communications policy reform, the Telecommunications Act of 1996, was passed—a period of time that has seen enormous changes in communications technology. For example, that legislation barely mentioned the Internet and focused almost entirely on reforming regulation of local and long distance phone service. According to Kevin Werbach, “We’ve known for at least 15 years that the 1996 Act is out of date.”

But enacting major new legislation is never easy. What allowed that legislation to pass was the development of a consensus that the existing law was preventing capital from going where it needed to go: local telephone companies needed to invest in long distance service and long distance companies needed to invest in local service. Is there some equally significant mis-allocation of capital today that would justify a new act?

Jonathan Chaplin, Managing Partner of New Street Research, pointed to the massive investment that will be needed to implement the next generation wireless standard, 5G. The new standard, which is currently under development and is scheduled to be fully specified in 2020, will bring dramatic increases in performance (higher speed, lower latency and greater capacity), but it will be disruptive in terms of blurring the line between wired and wireless communications. And because it will make use of very high frequency, short-range spectrum, 5G will involve the deployment of a vastly larger number of small cells to provide capacity where it is needed. Much of the infrastructure needed to support this denser network architecture does not exist.

It is estimated that upgrading current wireless networks and implementing 5G will require in excess of $100 billion in capital investment. If the current regulation regime represents a significant disincentive to making this investment, new legislation could be warranted. And David Redl added that capital allocation is not the only basis for justifying a new act. There is, he suggested, a growing consensus that the current law is simply inadequate to the needs of current society.

Kevin Werbach proposed three possible scenarios that might bring action to pass new legislation: first, an industry impasse that triggers change (one possibility might be related to the transition from the traditional phone network to a pure IP environment, which could trigger worry about the treatment of stranded assets); second would be the occurrence of a crisis of the magnitude of 2008 or a “digital Pearl Harbor” that calls for a dramatic response; and third would be a “tectonic” election that rearranges the policy landscape and policy priorities in a major way, which may be where we are now.

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