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Rewriting the U.S. Communications Act for the 21st century

The primary law in the United States governing the telecommunications industry is the Communications Act of 1934 (the “Act”).[1] Congress adopted the Act during the Great Depression, at a time when the latest consumer technology was broadcast radio, and last updated the law nearly twenty years ago, when most people accessed the Internet using dial-up and “smartphones” were still science fiction.[2]

The Communications Act has strained to keep up with the incredible changes in the telecommunications landscape in the last eighty years, and rumors of a “rewrite” of the Act swirl regularly in Washington D.C. Recent efforts by several House Republicans suggest that broad reform of the telecommunications law could be possible in the relatively near future. The result could be a significant restructuring of the way radio, television, mobile communications, and the Internet are regulated in the U.S.

Congress drafted the original Communications Act to consolidate already existing laws that governed telephone, radio, and telegraph communications into a single statute. This way of conceptualizing the telecommunications marketplace still defines the Act, which is divided into sections, or “Titles,” that roughly correspond to specific industry silos such as broadcast, cable, or telephony.[3] One problem often mentioned by advocates for reform is that the nature of what constitutes “radio” or “common carrier” services is no longer clear-cut, and can give rise to disparate regulatory treatment of otherwise closely related new industries and services.

Against this backdrop, the Republican-led House of Representatives Energy and Commerce Committee (the “Committee”) launched a review process of the Communications Act in 2013 with the ultimate goal of rewriting that statute.[4] Since January 2014 the Committee has released five “white papers” seeking public comment on issues central to telecommunications law and policy in the United States. The Committee launched its inquiry by seeking broad comment on how best to “moderniz[e] the Communications Act,” including ways to change the basic structure of the Act to remove its emphasis on industry sectors that can quickly become outdated with technological shifts.[5] Since then, the questions posed by the Committee’s white papers have become more targeted. The second white paper focused on spectrum policy, and asked for public comment on, among other issues, what Congress could do to maximize the efficiency of spectrum use and how it should regulate unlicensed spectrum.[6] The third white paper, released in May 2014, raised thorny issues of how the FCC should define “competition” in the modern communications marketplace, taking into account the growth in intermodal competition that some critics allege has strained the “siloed” construction of the current Act.[7] A subsequent Committee white paper asked pointed questions about the existing interconnection regime, including the challenges the IP transition poses to existing regulations.[8] The Committee’s most recent white paper solicited input on the Universal Service Fund (“USF”), which collects more than $8 billion per year in fees from wireless and wireline carriers and uses it to subsidize telephone and broadband services in high-cost areas, for lowincome consumers, in schools and libraries, and for rural healthcare providers, and has long been a lightning rod for reformers on both sides of the aisle.[9]

Although previous efforts to reform the Communications Act have failed, the current Committee’s efforts have a better chance of progress than those of its predecessors. The Republicans already control the House of Representatives, and recent polls show the party is likely to gain control of the Senate this November. With a majority in both houses of Congress, the Committee’s efforts to rewrite the Communications Act would not face the partisan divide that has stymied past efforts.

At stake in a rewrite of the Communications Act is the regulatory treatment of a huge driver of the U.S. economy. The telecommunications industry is one of the fastest growing in the U.S., valued at $511.3 billion in 2010, and projected to grow to $774.7 billion by 2020.[10] The wireless marketplace in particular has “large and persistent positive spillovers” to the entire U.S. economy.[11]

Although the Committee has not yet signaled how it might restructure the Act, some of the key areas for reform are already topics of spirited public debate. Efforts to limit discrimination in broadband providers’ handling of Internet traffic have attracted the most attention of any issue in 2014. Beyond the headlines about paid “fast lanes” for certain types of Internet traffic, the “open internet” rubric has come to include a raft of related issues and obligations including interconnection, peering, reasonable network management, congestion pricing, and permissible service offerings – any one of which has the potential to alter longstanding commercial relationships among carriers in the industry.

The Committee has also signaled its interest in reform of billions of dollars of subsidies for communications services. Congress created the USF to ensure that all consumers have access to telecommunications and advanced services such as broadband at affordable rates. Funding for all USF programs comes from fees paid by mobile and fixed telecommunications carriers, as well as certain other providers. One of the key debates about USF is what services and providers should have to contribute to the Fund. Some carriers argue that the contribution base should be expanded to include broadband providers. Others, especially in the technology sector, argue for a narrower base of contributing parties in the interest of promoting technological innovation. Because providers can and typically do pass along their USF contribution fees to consumers on their telephone bills, any change in the contribution structure would be likely to have a direct and immediate effect on the bills consumers see every month.

Simplifying the laws that currently govern infrastructure deployment is another Committee goal. The Communications Act includes a complicated series of provisions regarding the rights of telecommunications and cable providers to attach equipment to existing utility poles, and the ability of state and local governments to control the permitting process for the construction of new telecommunications infrastructure. The latter issue, in particular, has set up a key battle, as states and local governments attempt to maintain control over their permitting processes, while wireless providers argue in favor of expedited, federally-controlled processes.

Other important issues that Congress is poised to consider are more arcane, but may have more immediate consequences for the industry. For example, although few consumers are aware of the existing provision of the Act that requires incumbent carriers to provide non-discriminatory “special” wholesale access to their network to competitors, the current statutory language does not specifically require access in an all-IP environment, which could affect the ability of competitors to obtain access to incumbents’ networks following the pending IP transition.

As with any reform driven by Congress, a shift in the political environment could change the direction of Communications Act reform at any time. But if the Republicans take control of both the House and Senate this Autumn, as many (though not all) pollsters predict, Congress seems likely to seek substantial revisions to the laws governing broadband and communications in the United States – a development that promises profound and lasting effects on the U.S. communications sector.

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1 See 47 U.S.C. § 151 et seq.

2 The Telecommunications Act of 1996 is integrated into the Communications Act. See Telecommunications Act of 1996, P.L.104-104 (1996).

3 The Communications Act is divided into seven Titles: General Authority (Title I); Common Carriers (Title II); Special Provisions Relating to Radio (Title III); Procedural and Administrative Provisions (Title IV); Penal Provisions and Forfeitures (Title V); Cable Communications (Title VI); and Miscellaneous Provisions (Title VII).

4 “Upton and Walden Announce Plans to Update the Communications Act,” Energy & Commerce Committee (Dec. 3, 2013), available at http://energycommerce.house.gov/press-release/upton-and-walden-announce-plans-update-communications-act (last visited Sept. 10, 2014).

5 White Paper: Modernizing the Communications Act (rel. Jan. 8, 2014), available at http://1.usa.gov/1tJvebC.

6 White Paper: Modernizing U.S. Spectrum Policy (rel. Apr. 1, 2014), available at http://1.usa.gov/1m1eTQM.

7 White Paper: Competition Policy and the Role of the Federal Communications Commission (rel. May 19, 2014), available at http://1.usa.gov/1wg6BqM.

8 White Paper: Network Interconnection (rel. Jul. 15, 2014), available at http://1.usa.gov/1sDKd8Q.

9 White Paper: Universal Service Policy and the Role of the Federal Communications Commission (rel. Aug. 22, 2014), available at http://1.usa.gov/1wg6jAg.

10 Richard Henderson, “Industry Employment and Output Projections to 2020,” U.S. Bureau of Labor Statistics (rel. Jan. 2012), available at http://www.bls.gov/opub/mlr/2012/01/art4full.pdf (last accessed Sept. 12, 2014).

11 Peter Cramton, Evan Kwerel, Gregory Rosston & Andrzej Skrzypacz, Using Spectrum Auctions to Enhance Competition in Wireless Services, 54 J. L. & Econ. S167, S170 (2011). An analysis from 2011 found that the U.S. wireless industry directly or indirectly provides 3.8 million jobs, or 2.6 percent of all U.S. employment, and was valued at $195.5 billion. Roger Entner, The Wireless Industry: Essential Engine of US Economic Growth, Recon Analytics 1 (May 2012), available at http://bit.ly/Msb2Le (last accessed Sept. 12, 2014).