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Most Millennials were born at a time when the most prevalent way of watching a movie or listening to music was done by popping a tape into a player. That same generation has witnessed the transfer of all media content to a digital format that first started with compact discs and now exists wirelessly in the cloud. Shouldn't we expect similar modernization of the regulations that guide how the communications and media markets operate? Currently, there are several outdated regulations in need of outright repeal or overhaul that could contribute significantly to economic growth in America. Here is just a look at some of those rules.
The newspaper/broadcast cross-ownership rule’s time may have come and gone
The Federal Communications Commission (FCC) led by Chairman Ajit Pai will vote this week to eliminate the Media Cross-Ownership Rule which was first instituted by the commission in 1975 to prevent entities from owning both a broadcast television station and a newspaper in the same service area. This policy was instituted to promote a diversity of viewpoints over the airwaves — which are considered a scarce resource — at a time when Americans consumed their news from a limited number of sources. In 1996, Congress passed the Telecommunications Act which required to FCC to conduct a review of its ownership rules every two years.
As sources of news have increased, it may be time for the FCC to abandon this media cross-ownership rule. When newspaper revenues are declining overall, the elimination of the cross-ownership rule may open up new sources of investment for print media. Not only can the rule potentially help newspapers, it may prove to be unnecessary given the current media environment. Today, according to the Pew Research Center, 43% of Americans get their news online and at least two-thirds of those studied used social media at some point for that purpose. With regard to Millennials, a majority of Americans under-30 use the internet for news.
Given that the Media Cross-Ownership Rule was rooted in the 1970s scarcity of media sources, the emergence of the internet and digital news potentially renders the regulation’s purpose obsolete. Chairman Pai is right to modernize America’s media cross-ownership rules.
Connecting all Americans by eliminating archaic siting policies
Federal regulators do not have a monopoly when it comes to having outdated rules. In fact, many states and localities impose onerous and outdated siting requirements and fees on our nation’s communications providers. One such example are the massive fees that localities charge wireless providers to site small cells. Small cells are essentially radio antennas about the size of a pizza box that will be used to transmit high-speed internet. These small cells, which enable 5G networks, will help make smart cities, telemedicine, autonomous cars, and greater mobile connectivity a reality. According to Accenture, 5G technology has the potential to add an additional $275 billion in investment that could lead to the creation of 3 million new jobs and $500 billion in GDP growth over the next seven years.
Unfortunately, many localities are clinging to old fee and siting structures used to site the larger cell towers with which most Americans are familiar. These fees and siting requirements many times are not based on the actual cost of permitting and can be cost-prohibitive for a communications carrier that needs to install a large number of small cells to make a 5G network operate. Just look at the regulatory structure for cable franchise fees, which costs consumers over $3 billion annually. As long as local governments continue to look to the past for broadband deployment regulations, they will deprive their citizens, especially those in rural and tribal areas, of the economic and societal benefits of high-speed connectedness.
Notwithstanding federal law that caps the franchise fees that localities can charge at 5% of revenue (also not based on the actual cost of permitting), some localities will charge cable operators additional fees even greater than 5% to provide broadband and other telecommunications services with no real extra cost incurred to the government – but at a real cost to consumers. Such an approach discourages investment in high-speed internet.
What can policymakers do to encourage localities to employ siting policies that foster internet deployment? Some forward-thinking states like Arizona have passed legislation to streamline and modernize communications permitting. Alternatively, the Federal Communications Commission has the ability to remove barriers to communications deployment and preempt local regulations and prohibit the charging of unreasonable permitting fees.
The 1934 Communications Act
For the most part, the communications industry, with the exception of broadband until recently, has operated under a regulatory framework developed under the 1934 Communications Act for the rotary-phone Depression Era. Congress made some reforms to the Act in 1996, but there is still a long way to go in modernizing today’s telecommunications laws.
One such example of the misapplication of 1930s regulatory policy is the decision in 2015 by the FCC to categorize broadband as a Title II common carrier which effectively treats the internet service industry like a public utility. According to a recently released report by USTelecom, overall broadband investment declined again in 2016, the second year in a row. Although some argue that investment has not declined, the current reality starkly contrasts with promises made by former Chairman Tom Wheeler that the Open Internet Order would spur investment.
Currently, Chairman Pai’s FCC has undertaken the Restoring Internet Freedom rulemaking to eliminate the Title II classification of broadband. Congress can also get to work by modernizing America’s internet laws by codifying net neutrality principles while not treating the internet like a public utility.
The Media Cross-Ownership Rule, local siting regulations, and Title II regulation of the internet are just the tip of the iceberg when it comes to older regulatory regimes that may have seen their costs outweigh their usefulness. The FCC, Congress and local and state policymakers should realize the benefits that newer technologies have and cut the analogue red tape of yesterday and bring today’s regulations into the digital age.