The Politics of Competition: Review of Clifford Winston's Government Failure versus Market Failure: Microeconomics Policy Research and Government Performance and Mark K. Landy, Martin A. Levin & Martin Shapiro, Eds., Creating Competitive Markets: The Politics of Regulatory Reform

Article excerpt

     A. Government Failure
     B. Creating Competitive Markets
     A. Perils
     B. Promise


For a quarter of a century, debates over telecommunications policy have been dominated by deregulatory ideals. The growing force of deregulatory arguments reflects a confluence of multiple factors. Technological change has devastated old assumptions regarding the extent to which the industry is afflicted by natural-monopoly characteristics. At the same time, commentators in the academy, the industry, the think-tank community and the bar have developed a powerful critique of expansive government involvement in regulated industries. This critique is itself multifaceted, stressing both the ways in which markets often correct disturbances on their own and the ways in which well-intentioned policies can or do create more harm than good. Finally, these factors have coincided (whether or not coincidentally) with the ascendancy of a deregulatory politics, with Republicans holding the White House for all but eight of the past 25 years, and the one Democratic President, Bill Clinton, joining in praise for deregulatory reform. (1)

Given this potent array of promarket forces, one would expect telecommunications policy to have followed a firmly deregulatory path. Indeed, many see that expectation realized in the current policy framework. These observers point to consolidated ownership of key infrastructure assets, the eradication of once-central line-of-business and structural-separation requirements, a shift from rate-of-return rate regulation toward incentive regulation in the form of "price caps," and the elimination of many network-sharing requirements as applied to next-generation facilities. Reactions to these developments, of course, are mixed. Proponents of deregulation cite the tremendous growth in broadband deployment, the dramatic expansion of wireless service and the advent of the Internet and related applications (including but not limited to voice over Internet protocol ("VoIP"), file-sharing and streaming media), and attribute these developments to the government's light regulatory touch. Critics gaze on the past twenty-five years and perceive a steady march toward reassembly of the monopoly-era Bell System, with Regional Bell Operating Companies ("RBOCs") merging and acquiring their long-distance competitors. (2) These critics are unimpressed with the competitive pressures exerted by new wireless and data offerings, which, they worry, are or soon will be controlled mostly by those who, in their view, already exert oligopolistic power over the traditional telephone network.

But what if all these observers--proponents and critics alike--are simply wrong about the state of regulation? For all the talk about a move to liberalized markets, (3) and all the growing strength of market ideals, various critical indicia suggest that the government's presence in the telecommunications market is at least as pervasive today as it was twenty-five years ago. The Code of Federal Regulations contained about 600 more pages worth of communications regulation in 2007 than in 1983. Expressed in 2008 dollars, political contributions from telecommunications service and equipment providers rose from about $1.4 million in the 1989-90 period ($859,337 in 1990 dollars) to over $4.3 million in the 2007-08 period. And membership in the Federal Communications Bar Association more than doubled between 1983 and 2008, from 1,190 members to 2,462 members. Each of these figures suggests that whether or not policy has moved in a market-oriented direction since 1983, government involvement still permeates the industry, and regulated entities are investing in lobbying efforts accordingly.

Two recent books shed light on the apparent tension between the ascendance of deregulatory talk, on the one hand, and the tenacity of regulation itself, on the other. …