The Politics of a Paradigm Shift: Telecommunications Regulation and the Communications Revolution; by W. Russell Neuman, Lee W. McKnight, and Richard Jay Solomon, in Political Communication, Vol. 10, pp. 77 - 94, 2003. more

PoUacal Communication, Volume 10, pp. 77-94 Printed In the UK. All rights reserved. . 1058-4609/93 $10.00 +.00 Copyright © 1993 Taylor & Francis The Politics of a Paradigm Shift: Telecommunications Regulation and the Communications Revolution W. RUSSELL NEUMAN Tufts University LEE MCKNIGHT RICHARD JAY SOLOMON Massachusetts Institute of Technology Abstract As a result of the convergence of telecommunications and mass communications technologies, American policymakers face a series of critical decisions about infrastructural investment, technical architecture, and regulation that will determine the character of the U.S. electronic industrial base. This article develops the argument that the current policy trajectory will likely lead to some awkward choices. Powerful vested interests have distorted the communications policy process. Regulatory inertia has come to tie the hands of the regulators as well as the hands of industry leaders. We argue that there exists a critical opportunity for independent communications policy research to make a difference and to anticipate and facilitate a paradigm shift in telecommunications regulation. Keywords comnnunications policy, telecommunications, regulation, communications technology. The field of political communications research has not suffered for lack of energizing controversy. At the macro level of analysis focusing oh communications institutions and policy, communication scholarship has sustained debates over issues of, for example, localism, pluralism, intellectual property, universal service, public access, privacy, commercialization, free speech, and the need for balance in international communications flows (Faulhaber, 1987; Hills, 1986; Hills, 1991; Huber, 1987; Neuman, 1992; Newberg, 1989a; Newberg, 1989b; Pool, 1983; Snow, 1986; Tunstall, 1986). Micro-level research has addressed problems of television and children, and the accumulative effects of political bias and propaganda in mass media (Comstock, Chaffee, Katzman, McCombs, & Roberts, 1978; McGuire, 1985; Nimmo & Sanders, 1981; Swanson & Nimmo, 1990; Wartella & Reeves, 1985). However, despite all of this intellec- This essay is based in part on sections of the forthcoming book. The Cordian Knot: Political Gridlock and the Communications Revolution and "Communications Policy in Crisis" published in Sapolsky et al., 1992. An earlier version of this article was delivered as a paper at the International Communications Association Annual Meeting, Miami, Florida, May 1992. 77 78 , Neuman et al. tual activity, the connection between communications scholarship and public policy remains a weak one. When policymakers confront particularly difficult or new and unfamiliar problems in international affairs, education, health, law, and economics, they have become accustomed to.calling on field specialists for expertise and advice. The more distinguished scholars in these fields have, over the years, come to expect to be consulted. The process of research, publication, and training in these domains is geared, at least in part, toward relevance to realworld problems and real-time policy debates. In particular, the vocabulary and the underlying paradigms of the lawyers and economists pervade the policy process. However, very little of this can be said to characterize the field of communications research. Expertise in political communications is seldom seen as a resource to be tapped in the design of effective policy. Policymakers instead turn primarily to lawyers and economists who chose to address communications issues. As a result, the array of policy options under consideration are more narrow arid more closely tied to the vested interests of the currently dominant players than they need be. Communications researchers, it would appear, are content to write for their own and only occasionally for more public consumption. Advanced study in the field prepares students narrowly for careers of research and teaching rather than public service. There are, of course, significant and increasingly encouraging exceptions to this pattern. However, it is this traditional discontinuity between research on communications and decision making on communications policy that we hope to address in this article. Our argument has three elements. First, we make the case that the isolation of communication scholarship from communication policy making is especially ironic. Even a brief review of the history of the field reveals that many of the key developments in communications scholarship are closely tied to the immediate political events and policy concerns of their respective eras. Second, we put forward the argument that the current communications policy agenda represents a critical watershed—a historically unique opportunity to draw on the best research to shape a new communications infrastructure that serves the traditional values of political diversity, openness, and balance. Third, we analyze the current debate in the United States over deregulation of local telecommunications as a case study. We argue that the debate represents the leading edge of a paradigm shift in the analysis of telecommunications regulation. Regulatory guidelines dominated by a paradigm of economic efficiency and legal contractual principles, we assert, will be strengthened by the addition of new conceptual tools drawing on political economy and political communications. This development offers special opportunity not only to study political change but also to influence it. The Evolution of Communications Research Wilbur Schramm (1963) described communications as an intellectual crossroads, an oasis in the desert in which researchers from the traditions of psychology, sociology, and political science worked together on pressing problems and then moved on in their scholarly travels. Schramm's particular Telecommunications Regulation 79 concern was with the identity and continuity of interdisciplinary communications scholarship. However, his analysis draws attention to another defining characteristic of the field—its problem-centered origins. The work of Lasswell, Pool, and Janowitz at the Library of Congress during the second World War and of Hovland and his colleagues at Yale shortly after the war were a direct result of concern over the power of political propaganda made manifest in European fascism (Neuman, 1989). Lazarsfeld and his associates at Columbia, in their attempt to develop and refine tools for the study of media and public opinion, founded the Bureau of Radio Research, explicitly tying their intellectual effort to the historical evolution of this worrisome new medium of mass communication (Katz, 1987). Shortly thereafter, they and their colleagues turned their attention to the evolution of a yet newer frontier, the introduction of television. As before with motion pictures, comic books, and radio, public concern with the potentially harmful effects of the new medium on children spawned a large and systematic effort to understand the nature of the medium and its intended and unintended social consequences (Wartella & Reeves, 1985). Scholars attempted to move beyond a narrow, problem-centered approach to develop more generalizable models of communications processes, building on Shannon and Weaver's (1963) framework to an institutionally and culturally embedded model (McQuail, 1987; McQuail & Windahl, 1981). The situation was parallel to the role of social science research during President Johnson's Great Society initiative concerning education, welfare, and race relations in the mid 1960s, as insightfully documented by Aaron (1978). By the time the research community had returned from the field and analyzed and interpreted the newly collected data, the impatient policy spotlight had moved onto other matters. Furthermore, the carefully balanced and qualified conclusions and methodological side debates rendered the work of little use to the policy analysts working the trenches of the political debate. Czitrom (1982), Lowery and De Fleur (1983), and Delia (1987) have traced the evolution of communications research and its roots in social problem solving in significant detail. Delia's analysis, in particular, emphasizes the unfortunate fragmentation of communications research into a series of unconnected microissues. It is ironic that this research tradition dramatically forged in the cauldron of an active policy debate has lost touch and drifted away from its origins into academic isolation. Communications Policy at the Crossroads To understand the crisis and the current needs for communications policy research, it may be helpful to briefly review a timeline of technological innovations in communications. The fundamental technology of high-speed printing was perfected in the early 1830s, and the corresponding business practices and economics of the newspaper, magazine, and book industries have been relatively stable for the last century and a half. After a wild period of competitive telephony, the basic technological and regulatory architecture of the American telephone system was crystallized by the Kingsbury Commitment of 1913 and the near-monopoly of AT&T. Radio broadcasting was initiated in the early 1920s and television broadcasting in the late 1940s under a principle of minimal regulatory 80 Neuman et at. constraint and licensed access to the spectrum by a mixture of commercial and educational entities. Once established, each of these industries defined a unique and fundamentally noncompeting marketplace for its services. After the introduction of the vacuum tube, which radically changed both radio broadcasting and telecommunications transmission, and electromechanical switching for telephony, both mass media and common carrier industries stabilized for a relatively long period. Because of limited entry of competitors due to a reinforcing mixture of regulatory, spectrum, and scale-economy factors, these industries grew to be quite profitable with returns on investment well above the overall industrial average (Barnouw, 1975; Beniger, 1986; Brock, 1981; Pool, 1983). By the 1970s, the growth of cable TV, satellite communication, and highspeed computing began to disrupt the existing structure. The first effect of these new technologies was to begin to break down the long-standing barriers to competitive entry within industry sectors. New companies aggressively sought regulatory approval to connect with the existing telephone network and to compete with it first for specialized services and shortly thereafter for traditional long-distance carriage. Cable companies got their start by simply carrying over-the-air TV signals to neighboring communities unable to receive regular broadcasts because of distance or geography. However, in the late 1970s, they discovered that they could receive national programming by satellite and compete virtually head-to-head with over-the-air broadcasting. The second-level effect was a gradual blurring of the boundaries between what were previously noncompetitive industries (Compaine, 1988; Neuman, 1991). At the moment, for example, the telephone industry is aggressively pursuing regulatory approval to carry television programming and compete directly with cable and broadcast television. Firms have adopted a variety of strategies for coping with the new competitive threats and opportunities. Some have turned to government and lobbied for protection from competition. Some have opted for the traditional strategy of buying out competitors and pursuing vertical and horizontal integration. Others have invested in developing a competitive advantage through proprietary technology. Still others have adopted a wait-and-see or mixed strategy (Egan, 1991; National Telecommunications and Information Administration, 1990; Williams, 1991). Each industrial sector—broadcasting, publishing, and telecommunications—is still thriving and profitable. It is increasingly recognized, however, that in 10 to 20 years these industries will be transformed and integrated into a single, all-electronic, all-digital broadband network, in effect, an "information fabric" for the switched delivery of voice, text, high-resolution graphics, and high-resolution video. These changes will also draw a significant portion of the computer industry into the fray (Neuman, 1991). There will still be niche markets, but the boundaries separating market segments will be permeable and dynamic. These industries are all politically powerful. Policymakers and legislators are proceeding with appropriate caution. It is virtually impossible to make even minor changes in the regulatory structure without incurring the wrath and immediate legal challenge of major players who feel their existing franchise is threatened. Our hope, however, is that this crisis also represents an opportunity for independent communications scholarship to reconnect with its roots and rediscover its voice in the policy debate that lies ahead. Telecommunications Regulation 81 It is not that the policy community in the United States is unaware of these developments. The U.S. National Telecommunications and Information Administration (1988), for example, notes that the Information Age is already here and that telecommunications comprises its chief transportation system . . . Invisible highways of fiber optic cable and radio waves each second carry trillions of bits of information vital to the smooth functioning of our economy and society. Telecommunications is the electronic tie which can more closely bind our nation of communities together into an electronic "national neighborhood." (p. 3) The postindustrial society will force a rethinking of traditional values and life-styles: The current innovation in societal technology is not concerned with the productivity of material goods, but with information productiv-. ity, and for this reason can be expected to bring about fundamental changes in human values, in trends of thought, and in the political and economic structures of society. (Masuda, 1980, p. viii) Traditional models of politics and policy lose their relevance and ability to predict future events and social conflicts, we are told in the widely cited Nora and Mine (1980) report: "The information society does not fit these analyses and prediction. Going beyond the world of production, it fashions its new requirements according to its own plan, its own regulatory patterns, its own cultural model" (pp. 133-134.) What has reaJly changed? What has not really changed? Most importantly, what needs to be done to address these new historical developments? The accumulating research literature identifies a number of key trends that characterize the information age (Bell, 1973; Beniger, 1986; Ferguson, 1986; Inglehart, 1990; Masuda, 1980; Nora & Mine, 1980): (a) the expansion and increasing importance of the service sector of the economy relative to manufacturing and agriculture; (b) the growth in the numbers of managerial, professional, and technical occupations within all sectors; (c) the increasingly central position in the society and economy of education, theoretical knowledge, research, and the manipulation and communication of information; (d) the potential for continuing economic affluence and material productivity through automation, especially new forms of automation based on computer-aided information processing and artificial intelligence; (e) new flexibility and possibly smaller scale in computer<ontrolled manufacturing, allowing for more customization and responsiveness to individualized consumer needs; and (f) new postmaterialist values that increasingly emphasize individual self-actualization rather than the accumulation of material goods as a measure of status and achievement. It is a hopeful scenario of the economic future. What an irony indeed, if the United States, having led the way to the information age, stumbles, confused by the nature of its early successes, and although fighting hard to keep ahead, falls mysteriously farther and farther behind its economic competitors. In historical terms, it is a familiar story. The strategy that got you to the top may 82 Neuman et al. well be entirely inappropriate for keeping you there. The story repeats itself at the level of personal careers, the growth and decline of industrial firms, and in the cycles of national prominence in world politics. The MIT Commission on Industrial Productivity, for example, identified this tendency of government and industry to cling to out-dated strategies as one of the critical challenges facing the nation: The decline of the U.S. economy puzzles most Americans. The qualities and talents that gave rise to the dynamism of the postwar years must surely be present still in the national character, and yet American industry seems to have lost much of its vigor. In looking for ways to reverse the decline, it is only natural to turn to the methods that succeeded in the golden years of growth and innovation. Many business managers have adopted just this strategy. The results, unfortunately, are rather like those of a man who keeps striking the same match because it worked fine the first time. (Dertouzos, Lester, & Solow, 1989, p. 46) American Policy Paralysis Japanese authorities have acknowledged the implications of these dramatic technical changes and have developed a coherent and dramatic game plan for harnessing these changes for their industrial advantage. Drawing on the Japanese Zaibatsu tradition, a complex pattern of intercompany cooperation and competition, they respond with a highly coordinated and aggressive strategy for economic survival in an increasingly competitive global economy (Hills, 1986; Johnson, 1982; Tyler, Jonscher, & Watts, 1988). The Europeans also have a game plan. It is even more complex than the Japanese case, because it involves the painful economic reorganization from a weak and fragmented array of countries into the largest and most powerful unified economic and political entity in the world history. It had a rocky start and has taken decades to develop, but the direction of European integration and cooperation is clear despite recent setbacks and close votes (Commission of the European Communities Directorate General XIII, 1990; Muller, 1990; Rogers & Balle, 1985). However different the Japanese and European approaches are, one thing is clear: Both approaches heavily emphasize the strategic importance of communications infrastructure to economic productivity. In contrast, it would appear that the American authorities have no vision at all in communications policy. The currently predominant American political orthodoxy dictates simply that the best game plan is no plan at all. American policymakers.appear to be so taken with Adam Smith that they feel that anything published more recently represents dubious speculation. The Washington community accepts the tenet that to propose anything that might be labeled even a distant cousin of industrial policy is sacrilege. The theological principle is that governments cannot pick winners. However, as numerous recent studies have demonstrated, such a premise misstates the problem (Cohen & Zysman, 1987; Graham, 1992; Lazonick, 1991; Stone, 1991). In advanced industrial systems, government rules and institutions inevitably structure the dynamics of competition. Markets are an extraordinarily effective mechanism Telecommunications Regulation 83 for allocation of scarce resources. Markets are not placed on the earth, however, by divine hands reaching through the clouds. Markets are built and structured by human hands for human ends. In our view, to argue that American success in industry and technology over the past two centuries was based on governmental forbearance in economic matters is to misread history. The constitution, the federal legal code, and American case law attest otherwise. From the building of post roads, canals, and railways to the establishment of agricultural research stations and land grant universities and support of aviation by the National Civil Aviation Commission and the National Aeronautics and Space Administration and from energy research through the Atomic Energy Commission and the Energy Department to health research in the National Institutes of Health, basic research in the National Science Foundation, and large-scale research and development of advanced technologies with possible defense applications, the U.S. government has influenced, ignored, picked, delayed, built, designed, invented, and made happen an extraordinarily large portion of our technical infrastructure (Neuman, McKnight, & Solomon, in press). A Paradigm Shift Would we characterize these developments as a paradigm shift? Perhaps we would be getting a little ahead of ourselves to insist that such a shift is already fully evident and acknowledged. In the domain of communications policy, however, it is becoming increasingly clear that the old distinctions between mass communications and telecommunications and between common carriage and other regulatory traditions is becoming increasingly untenable. Furthermore, questions of the social effects of communications move away from issues of propaganda and advertising that imply a captive and passive audience to issues of audience fragmentation, equitable access to interactive media, privacy, and the broader issue of communications infrastructure and economic and social productivity. Sometimes in intellectual history we might note that a new social theory or research finding moves its way from the academy to the real world where it is tested and refined, reformulated, or rejected on the basis of new social experiments. One thinks of Marxist and Keynsian economics, Freudian psychology, and, on a more modest scale, Kahnian deregulation theory and social theories that underlay the Great Society programs described in Aaron's book. At other times, the social scientists, like politicians and citizens, only react after the fact. Caught up in the wave of change, they realize that their premises and theories must be rethought and reformulated in the light of new events. This was certainly true of the dissolution of the Soviet Union that caught virtually all of the Sovietologists by surprise and also for the most part true of the early days of communications research as scholars scrambled to develop methods and models to better understand the effects of wartime propaganda. Our motivation in this article is to urge our colleagues to pursue the former model rather than the latter. Events are still unfolding so that the voice of independent scholarship regarding policy options and a historically grounded analysis of those options is likely to be welcome. One observer noted that the industrial revolution itself developed slowly enough that it was 84 Neuman et al. almost 100 years before the coherence of the revolution was recognized and the term industrial revolution came into general use (Bell, 1980). Perhaps we need not wait quite so long. In Thomas Kuhn's (1962) oft-cited analysis of scientific change, he notes that textbooks and teaching often lag far behind the frontiers of research, in effect, relying heavily on the older, fading paradigms. If our students are to be well prepared and our own work relevant, the fields of political communications and communications technology and policy must forge closer bonds and foster a self-awareness of the special opportunity these turbulent times present. In the following paragraphs we develop a case study based on our concept of open communications infrastructure, a possible exemplar, we would hope, of how a judicious mix of scientifically grounded analysis, policy advocacy, and the rattling of paradigmatic cages might serve the field of communications research and stimulate the pace of change. Open Communications Infrastructure The first paragraph of the 1934 Communications Act charges the Federal Communications Commission (FCC) with regulation of "commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States a rapid, efficient. Nation-wide and world-wide wire and radio communication service" (Section 1). It represents a most interesting choice of words. It would seem to envision a single, integrated communications system buy spectrum and wire to serve "the public interest, convenience, and necessity" (Paglin, 1989, pp. 14-19). Of course. Titles II and III of the Act reinforce the distinction between common<arriage, wireline telephony, and radio broadcasting, a legacy of the Cullom (Interstate Commerce) Act of 1887, the Mann-Elkins Act of 1910, and the Federal Radio Acts of 1912 and 1927. However, by all accounts, the 1934 Act, as reflected in these words, was designed to bring together the existing regulatory machinery from both traditions (from the Interstate Commerce Commission and the Federal Radio Commission) into a new and unified FCC. President Roosevelt's letter in support of this legislation emphasized the importance of bringing the two domains of communications together. The President's administration study group, chaired by the Secretary of Commerce, also supported this approach and expressed concern about a "collection of communications agencies not working in accordance with any national plan" (Paglin, 1989). The passage of the 1934 Act and implementation of the new Commission was surprisingly uncontroversial (Robinson, 1989). It was seen by some as a straightforward administrative convenience. Most of the commercial interests that now monitor and lobby the Commission did not exist in 1934. The broadcasters were a diverse lot, who had worked hard since 1926 to get the federal government to play an effective traffic-cop role in systematizing broadcast frequencies and reducing interference among stations (Barnouw, 1966). AT&T under President Vail welcomed strong federal regulation and protection in accordance with the Kingsbury Commitment of 1913 (Brock, 1981). Since then, industry and the Commission's own bureaucratic structure crystallized into three separate and independent areas: common carriage, private radio, and mass media. What an irony! The keystone of the 1934 Act, the development of Telecommunications Regulation 85 an integrated "rapid, efficient, Nation-wide and world-wide wire and radio communication service" (1934 Communications Act, Section 1) seems to have gotten lost in the bureaucratic shuffle. More recent attempts to rethink these premises or to rewrite the 1934 Act in light of all that has changed since the 1930s, however, have provoked an instantaneous and powerful firestorm of opposition. The antagonism stems from the many vested interests that have established viable businesses under the existing rules and fear what rethinking or rewriting might entail (Haight, 1979; McHugh, 1983; Weinberg, 1983). The divisions are clear-cut, the incentives to defend turf are powerful, and the political and financial resources of the stakeholders inspire awe even among experienced Washington observers. In 1934, historical conditions were ideal for a new initiative. The economy was gradually rebuilding. The New Deal was in full swing. The Communications Act was a relatively small element in a larger process of political change and reformation including the Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility Holding Company Act of 1935, and the Civil Aeronautics Act of 1938. The key industrial players in communications had calculated their gains and losses and had become comfortable that systematic federal regulation was the safest bet. Most important, the division of turf had been prenegotiated by the dominant firms of the day as a result of the General Electric (CE)/RCA/Westinghouse/AT&t cross-licensing cartel arrangements of 1919-1921. RCA did the broadcasting and was in large measure owned by the others, GE and Westinghouse manufactured equipment, and AT&T carried network traffic over its long lines but otherwise got out of the radio business, although it would later gain control of sound recording for film. In the 1990s, the pressures for change and reform of the organization and regulation of the information and communications industry are as great as they were in 1934 and perhaps greater. However, forces resistant to change are much stronger as well. The complexity of the relationships among the innumerable players when information has become the currency of business and the intricacy of international corporate alliances confounds the problem. The spectacular backroom deal of the 1920s cross-licensing cartel was hardly forged with the public interest foremost in mind and is certainly not a promising model for industry self-reform in the 1990s. Something of similar magnitude is needed if the public interest is to be served at this critical turning point in communications technology. There are, in our view, three likely scenarios for the evolution of our future bandwidth-independent, integrated, digital, broadcast-telecommunicatidns network. The Stalemate Scenario This is a worst-case future. The telephone companies, the broadcasters, the cable industry, the private radio and consumer electronics manufacturers, the computer companies, and the publishers all have their eyes on their neighbor's markets but opt to stick with what they know best and protect their cash flow, sunk costs, and existing plant by resisting any and all attempts to hammer out a deal. Litigiousness is rampant. The administration and Congress are paralyzed by intense cross-pressures. Ingenious new forms of foot-dragging are invented. 86 Neuman et al. Standards committees proliferate like fruitflies as their function shifts from setting standards to preventing them. Each vendor continues to believe it can outmaneuver all the others into adopting its own proprietary technology as the accepted technical standard for interconnection and to that end resists cooperative efforts. The FCC bowsWindustry pressure and attempts to conduct technical tests to pick the best technology on "objective technical criteria." The testing process is conducted and controlled by industry consortia because the Commission lacks funding. The tests take forever. The test results are ambiguous. Half the vendors take the Commission to court to demonstrate the tests were unfair. None of the tests have any relevance anyway, because a new generation of technology has been developed by the time the testing is completed. Congress attempts several times to break the impasse only to repeatedly confirm the old Washington adage that it is much easier to stop a bill than to pass one. The Slow Evolution Scenario This scenario is a modest reformulation of the worst-case model. Basically, in this case, despite the efforts of the industry stalwarts, the technology prevails. The logic of digital networks leads ultimately to interconnectivity and interoperability. In this scenario, the local exchange companies lose their battle against bypass. Local television and radio broadcasters get increasing competition as satellite and terrestrial spectrum, coaxial, traditional twisted-pair co|> per, and optical fiber each come to offer equivalent services. There are three problems with this version of the future. First, it significantly delays the development of an advanced intelligent network, with the attendant disadvantages to economic efficiency and productivity. Second, it builds an interoperable network out of pieces explicitly designed not to work that way, leading to inefficiencies and operational awkwardness. Third and perhaps most important, it holds American companies back from the cutting edge and effectively abandons the field of integrated communications to Europe and Japan. A New Scenario: Open Communications Infrastructure This is, in our view, a chance to demohstrate the power of ideas. Derthick and Quirk (1985), in their study of deregulation in telecommunications, trucking, and airlines in the 1970s and 1980s, have shown that academically grounded policy analysis under appropriate conditions can win the day despite the opposition of well-entrenched vested interests. A similar scenario may evolve in telecommunications regulation. At the moment, theories of fully competitive provision of telecommunications are the stuff of academic speculation. However, the complexity of the economic changes at hand offer promise that this might again be fertile ground for a paradigm shift in regulatory policy. We wish to propose for evaluation and further research a proactive national policy to make the provision of communications and information services competitive. We call this approach Open Communications Infrastructure (OCI). Its premise is the belief that if service provision is truly competitive, content and ownership regulations in broadcasting and common carriage reg- Telecommunications Regulation 87 ulations in telecommunications will no longer be necessary. If indeed such a policy is put forward with clarity and conviction, the response from industry is likely to be positive, creative, and swift. The elements of OCI are as follows: Open Architecture The future of the network is digital. Voice, text, data, and images will be transported by electrons and photons in digital format. Some messages will require extensive bandwidth, others will not. All communications systems, spectrumbased or wireline-based, have the potential for two-way interconnectivity. Some applications such as broadcast-style video may be predominantly oneway, but there is no reason to design the architecture so that two-way communication is precluded (as is true in today's radio, television, and cable delivery systems.) The heart of this approach is flexibility or designing a system that facilitates interconnection among different systems and services at present and as they develop over time. By emphasizing interconnectivity and interoperability, incentives in innovation shift from trying to protect licensing revenues by means of a proprietary technical communications standard or inherited spectrum allocation to the economies of scale in efficient manufacturing and service provision. Open Access The currently dominant model of communications economics is based on a presumption that limited spectrum and inefficiencies of the competitive provision of wireline communications services require legal barriers to competitive entry and regulatory oversight of the legally designated monopolists. The premise is outmoded. The critical turning point has occurred first in voice telephony and will occur in radio within 2 years and in video in a similar time frame. Ironically we see the turning point first in Eastern Europe and in the Third World where the need for building telecommunications is most urgent. Wireless access to the local loop turns out, in many cases, to be fully competitive with wireline provision. Hovyever, the use of wireless access to the network has other properties, especially in cellular and microcellular applications. The critical property, we argue, is the lack of steep economies of scale in service provision. To offer universal wireline service from the outset, one must wire every street on every block. To offer cellular service, one can start on a smaller scale. For fewer customers, fewer cells are required. As service demand expands, the number of cells expands gradually and efficiently, without requiring additional bandwidth. Another property, of course, is mobility and the flexibility of personalized communication service. In this way, the promise of OCI is an unanticipated artifact of cellular and personal communications network technology, a new generation of digital cellular telephony data and video services now under development. Wireless access to the local loop makes open competition in provision of local exchange service a meaningful prospect. 88 Universal Access Neuman et al. The principal element of the Kingsbury Commitment of 1913 was a horse trade. AT&T President Theodore Vail was willing to put his entire network under the control of federal and state common carrier regulation in return for protection from further competition. Part of the deal, however, was Vail's commitment to deliver on universal service, the use of cost averaging to provide inexpensive access to the network for even the most remote residential customers. For the most part, the system he built delivered universal service as promised. The deregulation of communications at this juncture raises fears that less privileged and more remote communities will be deprived of access. The fear is that competitive provision will lead to the decline of universal service. Critics, for example, point to the deregulation of airlines and the resultant changes in the cost and quantity of service to remote areas. However, it is at this point that the transportation-communications parallel breaks down. The economics of scale in providing airplanes and airports are still considerable (as those who have shared the services of a pilot and copilot with one or two other passengers in a small plane might attest.) Wireless works the other way. In fact, it is much more efficient for low-density applications in rural areas. Furthermore, direct satellite provision offers additional avenues for service extension and system redundancy. Universal access is a natural component of OCI. Flexible Access An interconnected and interoperable network of telecommunications, broadcasting, and electronic publishing breaks down a number of traditional distinctions. In OCI, one can make a call on the cable, send a fax over the radio, and watch television from the telephone line. The format will be digital. The bandwidth will be adjusted according to the demands of the user and the character of the communications. A teenager may not require high-speed and sophisticated data communications to manage her or his bank account, so the terminal can be simple and inexpensive and the demand on the network small and economical. Viewers casual about the quality of the picture and the release date of the movies they watch on TV can opt for the least expensive display, lower bandwidth provision, and older movies on an advertising-supported, free channel or lower cost pay-per-view. Viewers who are video aficionados with the latest equipment may demand the most sophisticated high-bandwidth signal and recently released programming. Such distinctions need not be legislated; a truly competitive market will provide more diversity than the law could imagine. However, the fundamental flexibility and interoperability in communications architecture is not an inevitable outgrowth of current market dynamics. The role of public policy in defining the nature of the market is critical. Problems of Implementation We have attempted in this article to put forward Open Communications Infrastructure as an attractive, persuasive, and coherent concept to guide a strategic and forward-looking reformulation of American communications policy. Our goal is to hasten public discussion and to foster critical analysis of what strikes Telecommunications Regulation 89 us as a potentially dramatic paradigm shift in telecommunication regulation. In that light, we conclude with a review of questions that we feel would particularly benefit from further analysis. Time Frame The direction of the technology is clear, but the specifics of the transitions are not. Further analysis is needed concerning an appropriate and flexible time frame for a transition from a partially open and partially competitive communications system to one that fully reflects those attributes. Timing is important because early prototypes are more expensive and less reliable than their offspring. The transition to OCI will require careful monitoring and an iterative process of analysis and further deregulation. Inertia and Power of Dominant Players Initially, the newspaper industry resisted the radio industry as an upstart competitor, but the newspaper publishers were smart. When radio showed promise, newspaper publishers bought stations, to their significant financial benefit for decades. The same pattern played itself out as cable television came to challenge the established broadcasters. If OCI evolves as we propose, the currently dominant players will draw on their two primary strengths, their expertise and their existing plant, for competitive advantage. In the transition from monopoly to competitive long-distance telephony, due care was taken to protect the balance between the new players and the dominant carrier until the new marketplace built some initial stability. Appropriate caution will be needed for implementation of OCI as well. Resistance of Vested Interests Some firms will no doubt calculate the relative advantages of muddling through with the current system of mixed regulation by comparing the known economics with the likely market dynamics of OCI, and these firms may conclude that the former is more likely than the latter to serve their economic benefit for some years. They will make their views widely known in public and in private. Albert Hirschman's (1991) recent historical study of the rhetoric of conservative reaction to reform movements lets one predict the form these criticisms wiil take. If history is any guide, these firms will also energetically proclaim that the public interest itself is ill-served by movement toward open and competitive communications. They will likely argue the proposal is perverse (that the actual effects of OCI policies will be other than predicted), that it is futile (that common carriage and content regulation will continue to be necessary), and that OCI puts the communications infrastructure in jeopardy (important traditions and values will be unnecessarily cast aside). "Who Is Usr The language of this article emphasizes the importance of meaningful American participation in the design, development, and management of an ad- 90 Neuman et al. vanced national communications infrastructure in the United States. As Robert Reich's (1989, 1990, 1991) now famous query implies, the question of how to define meaningful participation becomes increasingly complex as firms and economic linkages span national boundaries. Any nation's communications infrastructure is an important element of national sovereignty and political integration. The 1934 Act limits foreign ownership of telecommunications and broadcasting infrastructure. Similar concerns, appropriate to the modern global economics and the nature of the technology, need to be carefully addressed if the development of open communications technologies is to be successful. The search for competitive advantages for U.S. firms and industries through deployment of advanced infrastructure must be balanced with the need for interconnection with other nations' information systems. Limited Spectrum Is there enough spectrum to make competitive access viable? Our analysis indicates that there is enough. The key question, of course, is wireless access over what geographic distance. Microcell technologies permit dramatic efficiencies through geographic reuse of spectrum. Given the flexible, geodesic structure of OCI architectures, as spectrum for wireless access gets crowded, the incentives rise to move the wireline node closer to where the demand for communications resides and, in turn, reduce spectrum demands. Providing an alternative communications path in wireless access takes place through handoffs in fractions of a second. Providing alternative wireline nodes takes weeks and months but can move quickly when the market demands it. George Calhoun's (1992) recent study of wireless access estimates that fully wireless access for 500,000 lines (at voice bandwidths) in an advanced cellular system will require only 10 to 20 megahertz of spectrum using currently available compression techniques, which is less than the current allocation for mobile cellular and well within the limitations of the FCC's current spectrum allocation proceedings. In addition, even more advanced spread spectrum techniques may be able to provide service without requiring additional allocation of spectrum (Bryan, 1991). Spectrum allocation, especially reallocation of available spectrum previously reserved for government use, will be a controversial factor. Further research on spectrum auction, lottery, and marketable-rights alternatives will be necessary (De Vany, Eckert, Meyers, O'Hara, & Scott, 1969; Geller & Lampert, 1989; Levin, 1971; Schilling, Milstein, Pickholtz, Kullback, & Miller, 1991). The Role of Congress and the Administration The 1934 Act was a joint product of the efforts of the Roosevelt administration and the 73rd Congress. If powerful individuals on either side had had strong objections, the bill would have been scuttled and industry would have been forced to make do with the patchwork arrangement of existing legislation. The cooperation was fortuitous. Given the breadth of the issues involved here, a cooperative spirit is again of great importance. The notion of an integrated and proactive communications policy with important benefits to industrial productivity and employment Telecommunications Regulation 91 is likely to attract positive attention in Congress. The reliance on industrial initiative and competition rather than bureaucratic industrial policy is likely to resonate well with policymakers and the public. There is hope for a cooperative effort. The Role of the Existing Regulatory Agencies Some might claim that to put the FCC in charge of a proactive and truly deregulatory initiative would be to kill it. Others might argue that the Commission has the expertise and experience to manage a successful transition. After all, the Civil Aeronautics Board successfully plotted its own demise through a policy of deregulation. Some might argue that the National Telecommunication and Information Services (NTIA) is best positioned to champion a new cause (Derthick & Quirk, 1985). Others might argue that an entirely new agency (as was the case in 1934) will need to be specifically structured for the job at hand. Appropriate options for institutional responsibilities require further analysis (Neil, 1993). Next Steps We now have the opportunity to design a new electronic and optical network that blurs the distinction between mass and interpersonal communications and between one-way and two-way communications. Although the phrase "new media" is plural and most reviews of the field list the growing array of electronic devices identifying the special properties of each—from direct broadcast satellites; personal computers; digital, high-definition, and interactive television; videotex and teletext, electronic mail and high-speed computer networks; to a variety of enhanced services for an expanding digital telephone network—in the end, the new media are one. They constitute a single, highcapacity, digital network of networks that bridges what we now know as the separate domains of computing, telephony, broadcasting, motion pictures, and publishing. Each of these industrial sectors is currently highly profitable in its own sphere. The market boundaries between these sectors is based on a series of evolved social conventions for the repertoire of media technologies appropriate for each category of human communication. A single integrated electronic system for high-quality video, audio, and printed output makes such artificial barriers less meaningful. As a result, each corporation in these fields will soon face three or four times the number of determined and well-financed competitors for their business, a prospect about as welcome as an invasion of vandals and Visigoths. The American political tradition in such matters is laissez faire. The concept of a broadly focused reformulation of communications policy for the information age is most difficult, but rethinking regulatory fundamentals is clearly critical now. In putting forth the model of OCI as an American alternative, we feel we play to the strengths of American business and the American political tradition. We feel the choice is to wait hopefully for it to happen by itself—if it does happen—or to make it happen. The central goals are clear: fully competitive provision of all local and national communications services; 92 Neuman et al. and all distinctions lifted between wireline and wireless communications services, narrowband and broadband, broadcast and switched communications services, and content and conduit. The development of an intelligent and forward-looking American communications policy for the next century will require a great deal of further research and analysis. Our purpose here is to put a proposal on the table for further discussion. This article develops the case for a proactive approach to revitalizing the American communications infrastructure as forcefully as our resources and capacities permit It is the product of independent academic research. It is not the final word but is, we hope, the beginning of a debate drawing new voices and perspectives into the coming paradigm shift in communications policy. References Aaron, H. J. (1978). 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