*NOTE: The following letter is a submission to the House Committee on Energy and Commerce from EconoSTATS Contributing Editor Wayne Winegarden

January 21, 2014

Wayne Winegarden, Ph.D.
933 N. Kenmore Street
Suite 405
Arlington, VA 22201

Members of the Panel,

Thank you for the opportunity to submit comments regarding the importance of modernizing the U.S. Communications Act. The House Committee on Energy and Commerce has issued a summary that outlines the need for the Communications Act to be modernized. The Committee’s premise for modernizing the Communications Act is that the foundation of U.S. regulatory policy toward the communication and technology sectors is outdated. The Committee could not be more correct.

The market capitalization of the information technology and telecommunications industry is huge – approximately $7 trillion or around 40 percent of the total market capitalization of the S&P500. More importantly, these sectors are continually improving their products and services which helps increase the productivity of many other industries including the manufacturing industry, the health care industry, and the professional services industry. The information technology and telecommunications sectors also help consumers through enhanced entertainment products and services. While these benefits created by the IT and telecom sectors are tremendous, if not for the current regulatory structure, these benefits could be even greater.

The major obstacle that inhibits the potential growth of these sectors is that the structure of the U.S. Communications Act is incompatible with the modern communications industry. As I discussed in a recent editorial I wrote for Forbes (which I have enclosed), the communications and technology industry exemplifies Joseph Schumpeter’s famous maxim that capitalism is a process of creative destruction. In fact, vibrant economic growth is synonymous with a vibrant process of creative destruction. This is why the communications and technology sector is so important to the U.S. economy.

The Communications Act creates arbitrary industry silos. In too many instances these regulatory silos “pre-determine” the competitive process by imposing costs and operating restrictions on some parts of the industry that are not applicable to all parts of the industry. The consequence of these regulatory barriers is less innovation. With less innovation the opportunity to create new products and services, or enhance current products and services, or drive down the costs / expand the access to current products and services is lost. These losses reduce our well-being and our potential rate of economic growth.

In light of these considerations, I would urge the Committee to eliminate arbitrary industry classifications in the communications regulations. The Committee should also recognize that the telecommunications and information technology industry will be unrecognizable in 10 years – let alone in 20 years.

Thank you for your time and consideration of my comments.

Sincerely,

Wayne Winegarden, Ph.D.
Contributing Editor, EconoSTATS at George Mason University
Sr. Fellow in Business and Economics, Pacific Research Institute

For more on this issue, please see Broadband Regulations Should Heed the Lessons from the Dynamic Technology Industry on Forbes

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