Liberal Rules for a 21st Century World: The U.S. Experience with Convergence

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Paper Presented to Keidanren (Tokyo, Japan; Feb. 26, 2008).  Thomas W. Hazlett, Professor of Law & Economics, George Mason University School of Law.

The obsolescence of traditional Postal Telephone and Telegraph (PTT) monopolies has forced liberalization in the telecommunications sector. This transition challenges policy makers with two visions of convergence, however, one implying the emergence of a new monopoly where diverse applications are provided via a single high-capacity network, the other implying the growth of diverse networks that encroach upon rivals. The former generally implies mandatory network sharing regulations; the latter is associated with deregulation. The selection of these distinct policy paths can now be informed by experience. Ironically, U.S. competition in fixed-line phone service succeeded only after the sharing mandates of 1996-2004, designed to facilitate competitive entry, were over-turned by federal courts.. Residential broadband markets yield further data suggesting that deployments accelerate when open access requirements are eliminated. These experiments in liberalization can inform and advance pro-consumer, technology-friendly policies in telecommunications. 1. Convergence and the Transition to Competition The devolution of the separate telecommunications silos of the 1970s is now a familiar story. As early as 1987, Peter Huber’s masterful “Geodesic Network”[ ] framed the policy debate as one of adjustment to convergence, removing artificial barriers that kept potentially rival networks quarantined in monopolistic fiefdoms. Even then, a generation ago, the picture on the horizon was coming into focus: local voice access, long distance transport, multi-channel video, and data were not productively supplied under “regulatory apartheid”[ ]. What was a “vision” then is a reality today. Liberalization in telecoms has swept the globe; the PTT monopolies of the 1980s are now largely museum exhibits. But the ways in which communications markets have been opened differ across regimes. This can be said to reflect rival assumptions as to the full meaning of the term “convergence.”

Paper.Tokyo_.3.15.08-1.pdf

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