Government, Industry Officials See More Regulation on Horizon

Panelists said they expected a push toward more government intervention in telecom, largely because of what happened to the financial sector. “I definitely think there will be an attempt -- a strong attempt -- to try to increase the amount of regulation in the communications sector,” said attorney Howard Waltzman, former Republican counsel for the House Commerce Committee. He hopes “cooler heads will prevail,” he said. Robert Atkinson, president of the Information Technology & Innovation Foundation, said more regulation is probably needed. The pendulum has swung too far to the right, he said, but government must ensure it doesn’t swing back too far to the left. No matter what happens in the election, it looks like more regulation is coming, said Jeffrey Eisenach, chairman of economics consulting firm Empirus. The question is whether the U.S. will have “smart” or “dumb” government, he said.

Telecom doesn’t need more regulation, several panelists said. That the financial industry’s problems might have parallels for telecom is a “myth,” said Waltzman. The financial meltdown happened because banks’ investment houses were “undercapitalized” and they made too risky choices, he said. Gattuso agreed, calling the financial and telecom sectors “different animals.”

Government’s job isn’t to produce competition, Emery said. It “shouldn’t assume more regulation will solve the banking problem,” he said. Even if it does, they shouldn’t apply the same policy to telecom because “it’s more likely to hinder than help,” he said. Regulation discourages investment, Waltzman agreed, saying it would be “very unfortunate” if regulators no longer believe they can rely on free markets. “When government tries to manufacture a market … it puts everyone at great risk,” Eisenach said.

Low competition in the telecom industry could be a reason it’s stronger than banking right now, said Atkinson. “We have too much competition in banking and not enough competition in telecom,” he said. Unlike the financial sector, which has “about 8,000 too many” banks, telecom is made up of a few large, stable players, he said. Adding new competitors isn’t “the way we need to go,” because it will mean fewer customers for each company, he said. Less competition doesn’t mean consumers get hurt, he said. The FCC knows “when [large telecom companies] sneeze,” he said. And if a company does something wrong, a group like “Public Knowledge will write a press release that [same] day.”

Government regulation is needed because consumers don’t have much choice when picking telecom providers, said James Reid, aide to Sen. Jay Rockefeller (D-W. Va), during a second panel on the role of government in telecom regulation. Government should step in where markets have failed, he said. “The days of folks coming up to Congress to say ‘This is how we're going to do it’ … [are] coming to an end,” he said. “We're going to go back to regulating for what is in the public interest.”

Government shouldn’t overlook the consumer’s role in shaping company policies, said Carolyn Brandon, a vice president for CTIA. Though there’s “clearly” a role for Washington and the states, wireless carriers can be just as influenced by their customers, who will leave for a competitor if they don’t get what they want, she said. Regulation is appropriate when it addresses issues that the market might not have tackled on its own, Brandon said. For example, without government prodding, the industry might not have implemented CALEA and other public safety rules, she said. USTelecom primarily takes issue with economic regulation, said Jonathan Banks, USTelecom senior vice president.

Government should intervene to ensure companies are open with consumers, said Staci Pies, Skype government & regulatory affairs director. She cited complaints that Comcast didn’t disclose its network management practices. “To the extent the market isn’t self-regulating to enforce that type of transparency, then we will need regulators to step in and nudge network owners along,” she said. Competition alone isn’t always sufficient to maintain transparency, agreed Amy Levine, House Commerce Committee senior counsel. Recently, the committee found four companies who tested deep packet inspection without notifying subscribers, she said. “We shouldn’t write off the oversight of government altogether,” she said.