President-elect Obama intends to appoint Julius Genachowski, a protege of former FCC chairman Reed Hundt, as the commission’s next chairman.
Having been at the FCC with Hundt, Genachowski should have seen industries largely ignored by the commission — cable and wireless — thrive as a result of deregulation while the telephone industry it attempted to reinvent soon crashed.
As George Gilder and I noted in a paper this past summer, when the 1996 law passed, there were several cable operators who planned to offer competitive phone services in a venture that included Sprint Corp. These plans were shelved, according to Sprint CEO William T. Esrey, due the FCC‘s “pro-competition” policies: “If we provided telephony service over cable, we recognized that they would have to make it available to competitors.” Thus, the local competition rules which were intended to speed effective competition actually delayed it. Cable voice services did not gain significant momentum until 2004, when the FCC scaled back its pro-competition rules. Those changes prompted phone companies to enter the video market dominated by cable operators, who in turn accelerated their entry into the voice market dominated by incumbent phone companies.
Genachowski should know that in its pure form net neutrality regulation would encumber broadband networks with the same open access regulation which failed when applied to local telephone networks.