Free Up Telecommunications

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The recent mega-merger between Verizon and MCI is just the latest indication the entire telecommunications industry is restructuring itself much faster than Congress and federal regulators can possibly keep pace.

In response to this $6 billion acquisition by Verizon, some consumer groups demand new regulations and new antitrust measures to stem industry consolidation. Yet phone service prices have fallen 40 percent over the last decade and a half and they continue falling largely because of the dynamism and rapid technological innovation in this critical information-age industry. Consumers have benefited enormously when the federal government has allowed the free market to play its course in telecommunications.

That "faith in markets" philosophy is the critical policy course the next Federal Communications Commission chairman must pursue aggressively. Current FCC Chairman Michael Powell leaves in March. He has a legacy of success as measured by the industry's growth and innovation during his tenure.

Mr. Powell applied a light hand to regulation and a prudent pro-investment course - most of the time. The challenges to come for Mr. Powell's successor will be to further push the deregulatory boundaries. If Congress and the FCC do so, many telecommunications analysts believe we could see more than $100 billion of new capital investment in the communications sector in the next few years.

It appears the front runner is current FCC Commissioner Kevin Martin, who has a top-notch legal and economic mind. But Mr. Martin is controversial too. Many conservatives have opposed Mr. Martin because in 2003 he voted against Mr. Powell and with the Democrats on continuing the Gore-Hundt rules that forced the incumbent Bells to make the unbundled elements of their networks available to competitors at government-set prices. These deep-discount access fees undercut the profit incentive of Bells to invest in their networks and created an obstacle to last-mile broadband deployment to homes. We strongly opposed Mr. Martin's stance on this issue.

However, Mr. Martin has an impeccable free-enterprise pedigree, having worked with conservative heroes such as Judge Kenneth Starr and supply-sider Larry Lindsey. On all other issues than the Bell access decision on which he has taken tough stands, he has sided with free markets.

He dissented on Mr. …