Washington Report

Keeping Members Informed About Regulatory Issues

Contents
April 2000

TELEMARKETING ISSUES

COMMENT PERIOD EXTENDED ON TSR

The comment period for the Federal Trade Commission's review of the Telemarketing Sales Rule had been extended through May 30th. The DMA will comment. We will report further on this issue as it unfolds.

FCC COMMISSIONER SEES MORE MARKET, LESS GOVERNMENT IN INTERNET'S FUTURE

Federal Communications Commissioner Michael Powell made an interesting speech at a Symposium of Telecommunications Policy and Law in which he emphasized two themes: (1) existing regulatory frameworks have been rendered obsolete by the pace of technological change; and (2) the balance of power is shifting from states to the federal government in respect to jurisdiction over the core industries of the new economy.

Powell told the audience of prominent lawmakers, opinion makers and academics gathered for the symposium that the core technologies of the New Economy have made the existing statutes increasingly murky. The resulting increase in confusion has, in turn, led to a shift in regulatory authority from the states toward federal oversight agencies. As new technologies raise new questions, it is usually a federal agency that first interprets the law. Typically, Powell asserted, law is interpreted by a federal agency in a way that favors its own interests.

Powell further argued that the jurisdictional disputes between state and federal regulatory agencies were becoming moot. Technology, he remarked, doesn't like artificial, legal constructs. States, local and federal governments are continually fighting for jurisdiction over new technologies while "the same technologies are giggling at us." "Fiber optic doesn't know the difference between inter- and intra-LATA and doesn't seem to care," quipped Powell. "Increasingly, legal and jurisdictional boundaries are becoming nonsensical," he added.

Inter- and intra-state jurisdictions worked when telecommunications was based largely on circuit-switched technology and the industry was a natural monopoly. In the New Economy, with the prevalent packet-switched technology for voice, data and video information, bits are routinely disassembled and routed all over the world before they are re-assembled at the final destination point.

Commissioner Powell attributed the heated jurisdictional battles and the deluge of legislation to the fact that "the Internet is sexy." He pointed out that the Internet accounts for a full 6 percent of the nation's gross national product and touches every single federal and state district and constituency. As a result of its' status as "the next in-thing," there are currently over 600 bills pending before Congress with the word "Internet" in the title.

State legislators are equally, if not more active when it comes to the Internet. Despite the activism among states, Powell argued that the rules of the New Economy will ultimately be established by federal lawmakers and implemented by federal regulators. States, he continued, confront two fundamental problems. First, the Supremacy Clause of the 1996 Telecommunications Act gives the FCC "astonishing power to knock states out." Second, and, according to Powell, more importantly, the core technologies in the digital economy advance much faster than the government can respond. As a result, government on both the state and federal levels will continually play catch-up rather than ever getting ahead of the curve.

Powell identified a need for a new regulatory paradigm, one that involves much greater institutional flexibility in order to respond to the breakneck pace of technological progress. The regulation of the industries central to the New Economy should be left to the market, he argued, while the federal government will play more of an enforcement role. Currently, regulators trying to make a ruling take at least 6 to 8 months (AT&T v. Iowa Utility Board took 3 full years before it was resolved by a court ruling), in an environment where the technology in question may change in a matter of months or even weeks. As such, Powell asserted, regulatory agencies need more flexibility to avoid continued futility.

In response to a question from the audience regarding potential privacy and use tax legislation, Commissioner Powell responded that he expects the government to maintain its arms-length relationship with the Internet. "The government is not going to harm the industries responsible for the recent growth and prosperity," he remarked.

In short, Powell described a world in which the FCC would increasingly assert its authority over the core industries of the New Economy, and would do so in such a way as to rely on the market for regulation, while playing the role of the enforcer. This new, more nimble FCC, in turn, would have a greater capacity to adjust and survive in an environment of rapid technological change.

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