Wednesday, August 22, 2012

Standing in the Shadows of Giants: The Role of Intergenerational Equity in Telecommunications Reform


Herewith an old article, newly uploaded to my SSRN pageStanding in the Shadows of Giants: The Role of Intergenerational Equity in Telecommunications Reform, 71 U. Colo. L. Rev. 921 (2000), available for download at

This article addresses the role of intergenerational equity in telecommunications reform. It examines two specific controversies through the lens of intergenerational justice. Stranded cost recovery and expanded universal service support should be analyzed as explicit wealth transfers across generational lines. These policies reflect deep disagreement over how telecommunications law can best reconcile claims by competing generations. Stranded cost recovery proceeds from the assumption that future investors will abandon the telecommunications industry unless past investors are fully compensated in response to regulatory change. By contrast, the law has been expanding the definition of universal service in response to a fear that the "digital divide" will pit wealthy consumers against their poorer, younger counterparts.

Despite their opposite temporal orientations, stranded cost recovery and universal service support share a common link. Both policies reflect the command-and-control assumption that competition alone, in a closed and heavily regulated industry, will not spur investment and innovation. Stranded cost and universal service provisions, for radically different reasons, adopt a regulatory attitude that is more reminiscent of the unitary Bell System than it is consonant with the deregulatory ambitions of the Telecommunications Act.

Shadows in a graveyard

Telecommunications law indeed has "giants," but not necessarily the sort whose shoulders promote inexorable advance through invention and innovation. Rather, the brooding omnipresence of the public utility past and the unfulfilled promise of a deregulatory future cast long shadows across the face of telecommunications policy. The common strain in stranded cost recovery, universal service support, and even plain vanilla deregulation is an intense public desire to foster innovation. The law seeks technological progress in order to enrich tomorrow's generations and in order to liberate them from material and political constraints faced by their forebears.

So stark is the internal conflict within telecommunications that policymakers may be overlooking superior solutions. The "innovation markets" debate, so far more prominent in antitrust law and scholarship than its regulatory counterparts, provides the basic theoretical model. The American experience with the deregulation of electric power production sheds practical light on the problem. Together, theory and practice support a simpler, "third-best" solution that probably would outperform either stranded cost recovery or universal service. Of its own force, deregulation promotes technological innovation by accelerating entry and dissolving legally sheltered monopolies.

Telecommunications law can and should adopt a consciously progressive posture toward technological innovation and the interests of future generations. Telecommunications disputes should be resolved so that future consumers are systematically favored vis-à-vis past investors. Telecommunications law's ubiquitous "public interest" standard should reflect a forward-looking concern with intergenerational equity.


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