The Telecommunications Act of 1996 at 30, Part 4: The Continuing Need for Reform
The Telecommunications Act of 1996 just turned 30 years old, and this 4-part series commemorating its anniversary has explored why Congress passed the Act (Part 1), some of the problems with the law and the Federal Communication Commission’s (FCC) enforcement of it (Part 2), but also the way certain provisions helped boost national markets and innovation (Part 3). This final installment in the series identifies the continuing need for communications policy reforms, most of which Congress should have implemented long ago.
Just 11 years after the law passed, the Congressional Research Service (CRS) had already concluded that “the environment we live in today was barely contemplated” when the Telecom Act passed, and “[t]here is consensus that the current statutory framework is not effective in the current market environment.” What was obvious to CRS in 2007 is even more evident in the remarkably diverse information and communications technology (ICT) ecosystem of 2026.
Unfortunately, the FCC continues business as usual, which threatens to extend analog era regulations into the AI age. Congress still needs to address the archaic, unnecessary regulations that encumber this marketplace and then move to shrink the powers of the FCC and devise a timetable to close the agency for good.
Congress Left the Door Open to Regulatory Mischief
While the FCC’s relevance rapidly wanes, the agency remains remarkably active and continues to exert considerable influence over ICT markets. According to the Competitive Enterprise Institute’s latest annual survey of federal regulatory activity, the FCC ranks first among independent regulatory agencies in terms of rules promulgated, outpacing the Securities and Exchange Commission and Nuclear Regulatory Commission, among others. An estimated 88 percent of those FCC rules affect small businesses.
Even if some of these rules have pro-competitive intent, most of the agency’s regulations are unnecessary vestiges of a bygone era. Worse yet, many of the regulations benefit incumbents, not the public. “The FCC’s broad grant of authority, combined with its impenetrable complexity, means that it has nearly boundless ability to distribute favors and shape the trillion-dollar technology and media industries,” notes telecom scholar Brent Skorup.
For example, universal service subsidy rules have resulted in decades of cost overruns and inefficient delivery of service. For households in need of broadband assistance, subsidies should have long ago been divorced from distortionary FCC regulations that mostly benefited rural carriers. Policymakers should have delivered assistance directly to needy families as targeted, means-tested welfare instead.
Likewise, while some level of spectrum governance remains important, it too should have been removed from the FCC’s hands decades ago. Technical spectrum allocation and management decisions could have been transferred to the National Telecommunications and Information Administration or a private technical coordination body. FCC spectrum management simply has too many political strings attached and has too often been coopted by industry players to exclude competition.
Finally, as noted in Part 2, the FCC never had any business being America’s third antitrust agency by imposing layers of indirect mandates on parties pursuing mergers. The Federal Trade Commission and the Department of Justice Antitrust Division already possess more than enough authority to police markets and mergers.
Regulators Will Only Change When Forced by Congress or Technological Realities
The key lesson of the Telecom Act experience, therefore, is that it is essential to get the job done when looking to clean up past messes, and even more crucial to not create new problems while doing so. Instead of specifying meaningful limits on FCC power and a clear timetable to achieve liberalization objectives, Congress hoped that regulators would voluntarily abide by the Act’s goal to “promote competition and reduce regulation.” This was wishful thinking. Even before the Telecom Act, it was clear the agency would never relinquish control over markets, even when encouraged by Congress to forbear from regulating.
While the Telecom Act included various forbearance provisions and requirements for periodic regulatory review, the agency largely ignored them even though there was plenty of regulatory deadwood that could have been discarded long ago. The FCC, however, only seems to be willing to throw in the towel after old ICT technologies have become completely obsolete. For example, the agency only finally scraped its Morse code regulations in 2007, and just last year the FCC finally closed the book on regulations governing telegraphs, rabbit-ear broadcast receivers, and phone booths. This is why Congress needs to fix the issues left unaddressed by the Telecom Act and then devise a plan to downsize and eventually closing the FCC.
Forgotten Reforms That Are Still Needed Today
Various analysts and even some policymakers identified the deficiencies of the Telecom Act from the start. At the time of the Act’s passage, it was widely believed that Congress would follow-up with some important additional spectrum policy reforms as well as protections for internet services to ensure the FCC would not meddle in new sectors. Unfortunately, that also did not happen.
Many policy analysts and academics also proposed comprehensive reform frameworks, but Congress never entertained those proposals. In each reform proposal, the goal was to eliminate arbitrary FCC “public interest” powers, streamline universal service efforts, create more fully flexible and tradable spectrum property rights, and limit the powers of the agency over information markets in other ways.
Federal lawmakers still need to act on these goals. “As its original mission has faded, the FCC has become increasingly politicized, aligning with shifting partisan agendas rather than exercising independent expertise,” argues American Enterprise Institute scholar Mark Jamison in a new report on disbanding the agency. “Given its loss of purpose and its institutional weakness, it appears that communications policy in the U.S. would be better off without the FCC,” he argues. The agency’s core functions—common carrier regulation of communications and broadcasting licensing—are now obsolete. The FCC now operates primarily for the betterment of the many lawyers and lobbyists who continue to petition the agency to extend the life of old, unnecessary rules or impose new obligations on technologies and sectors that it has no business regulating. Congress must not let the FCC expand its mission well beyond its traditional boundaries such that it would become a veritable “Federal Artificial Intelligence Commission.”
Of course, the current legislative environment does instill one with much hope that any of this will happen. Congress has proven incapable of advancing comprehensive technology policy measures in recent years, and there have been no serious efforts to constrain the powers of the FCC. Nonetheless, the danger of continued FCC meddling in existing or emerging ICT markets is real and Congress should address the unfinished business of the Telecom Act.