What is Past is Prologue: Lessons to be Learned Before Any New #CommActUpdate

[Commentary] While Congress has had its share of legislative successes in the communications arena, it is important to recognize that Congress has also had its share of legislative failures -- primarily because Congress did not think through the underlying economics of the problem carefully before enacting legislation. By failing to understand thoroughly such important items as reasonable expectations of market structure, the effect of the legislation on stakeholder incentives, and by failing to account for the potential for technological change, many of the legislative initiatives contained in the Telecommunications Act of 1996 ultimately fell flat.

As we contemplate a communications law re-write, there are three broad inter-related principles that Congress should always keep in mind:

1. First, before passing any legislation, it is important for Congress to understand the underlying economics of the problem. This analysis must include, inter alia, reasonable and realistic expectations of market structure.
2. Second, any successful legislative paradigm must make sure that the incentives of all the stakeholders are aligned. Otherwise, as we saw with the regional Bell operating companies in unbundling and pay-TV providers in CableCard, sabotage against the paradigm will run rampant.
3. Finally, as Carl Shapiro and Hal Varian brilliantly state in their book Information Rules: “Technology Changes. Economic laws do not.” Accordingly, legislating on the basis of a specific technology makes little sense; instead, legislating on the basis of broader service or platform categories is probably the better approach, with an eye always on the underlying economic incentives of the participants.