Level 3 Communications

Nick Alexander

Twenty Years of Progress: Reflecting on the Telecommunications Act of 1996

This year we’re marking the twentieth anniversary of the signing of the Telecommunications Act of 1996 into law. It’s a nice reminder that our elected officials can work together in a bipartisan fashion to pass legislation that genuinely advances the public interest.

The ’96 Act, passed by an overwhelming vote in both the House and the Senate, built on the 1982 breakup of AT&T (in an antitrust lawsuit brought by the Department of Justice) by putting into place a legal framework designed to facilitate and allow consumers to enjoy the benefits of competition wherever and whenever possible. And while the FCC’s implementation of that framework has had its fits and starts, there’s no question that the ’96 Act got it right: reduce barriers to entry, rely on competition to protect and benefit consumers wherever possible, and, when it’s not, employ regulation sufficient to constrain the dominant provider.

A few things the ’96 Act put in place stand out as particular successes:

  • Interconnection – Sections 251 and 252 of the Act, which govern the obligations of telecommunications carriers to interconnect their networks to ensure the uninterrupted flow of voice traffic, have provided an excellent template to govern carrier-to-carrier, and in particular competitive carrier-to-incumbent monopoly telephone company, interconnection.
  • Intercarrier compensation – though it took the better part of 20 years, the ’96 Act enabled the FCC’s systematic rationalization of the intercarrier compensation regime, culminating in its decision to drive to “bill and keep” – meaning every carrier recovers the costs of providing service to its customers from those customers. Bill and keep, when fully implemented, will eliminate a number of incentives to engage in inefficient and even abusive practices.
  • Open Internet – The FCC’s decisions in the Open Internet Order both to limit discriminatory conduct by Broadband providers, and to provide a forum for edge providers and backbone providers to raise concerns regarding the interconnection practices of these large eyeball providers, is proof of the technology neutral approach of the ’96 Act and its usefulness as a tool to protect and promote competition.

Of course, no piece of legislation is perfect. There are a few provisions of the ’96 Act that have not operated, or were not implemented, in the manner intended:

  • Business Broadband (also known as dedicated services or special access) – Prior FCC decisions have overestimated the amount of competition available to constrain the dominant providers in important markets. This has allowed the incumbents to abuse their dominant position by charging monopolistic prices and by stifling competition where it might develop through anticompetitive demand lock-up agreements. These same incorrect assessments of market dominance resulted in the extremely premature deregulation of incumbent-provisioned, Ethernet-based business broadband services. Thankfully, the FCC is poised to rectify those errors.
  • Interconnection – Ironically, the flip side of the success of sections 251 and 252 is unnecessary uncertainty regarding the role of the states in the administration of agreements for the exchange of voice traffic in IP. The FCC should act to eliminate this uncertainty.
  • Rights-of-Way – Section 253 has not been as effective at reducing state and municipal barriers to competitive facilities deployment as we might have hoped. The FCC could issue some much-needed guidance to the courts in this area.

The ’96 Act has given service providers, enterprise customers, and the American consumer much to celebrate, including the fact that its most obvious shortcomings are errors of implementation that can be readily cured by the FCC. Which leads me to my closing point: after 20 years and thousands upon thousands of pages of comments, reply comments, implementing orders, court challenges, petitions for reconsideration, orders on remand and countless other documents filed by advocates from all sides of every issue, we have a pretty good idea of what the ’96 Act actually means in practice.

We know, for better or for worse, that unbundled network elements (UNEs) and local interconnection are priced based on total element long-run incremental cost (TELRIC), but not available everywhere; what role the states play in the administration of interconnection agreements; that the FCC has jurisdiction to adjudicate interconnection disputes between backbone providers and large ISPs (I’m sure about that, anyway); and countless other smaller but critically important points of law that govern the relationships between carriers and their customers. In light of that hard-earned understanding, we should be cautious when considering proposals to alter this incredibly successful law, lest we kick off another 20-year cycle of wrangling at the FCC and in the courts in the name of “regulatory certainty.” As much as I would appreciate another 20 years of guaranteed employment in my chosen field, all of us at Level 3 would prefer to focus less on regulation and more on fulfilling our vision to serve our customers as the trusted connection to the networked world.

The impact of the ’96 Act cannot be understated. Without it, it is unlikely that long-distance rates drop, effectively, to zero; where competition in the local exchange market drives the incumbents to roll out DSL, and the cable companies to respond with cable modem service; where all manner of edge providers – like Amazon and Netflix – leverage competitively deployed global fiber networks and the increasing capacity of consumer broadband services to deliver services that were largely science fiction when the Act was adopted. Without the Act, there is no Level 3 – no provider to deliver on the Act’s promise to allow competition to deliver high-quality, high-value services to enterprises, nonprofits, government entities, and, ultimately, consumers. There is, indeed, much to celebrate.