Regulation in the telecommunications sector is a mixed bag. Historically, telecom technology has been hoarded by the U.S. government for years before the release to general consumers. Government-protected monopolies dominate the landline phone business, while regulations have sometimes threatened innovation in the Internet communications industry.

The Federal Communications Commission

Most federal communications laws have their roots in the 1912 and 1927 Radio Acts. The latter established a Federal Radio Commission and mandated radio stations only operate in accordance with "public interest, convenience, and necessity." This language was borrowed, almost verbatim, from the monopolistic railroad laws in the 1880s.

Key Takeaways

  • The telecommunications sector today includes telephone, communications, and Internet companies.
  • The Federal Communications Commission was established under the 1934 Communications Act to regulate monopolies in the radio and telephone industries.
  • The FCC established network neutrality rules in 2015 to, among other things, prevent large Internet service providers from speeding up or slowing traffic to websites.
  • Net neutrality rules were repealed in 2019, but states are still allowed to determine their own open Internet regulations.

The 1934 Communications Act created the Federal Communications Commission or FCC. The FCC was initially established to control the government monopolies in radio and telephone, such as AT&T, of that day. In the decades that followed, the FCC evolved as a special-interest vehicle of entrenched telecom companies, much like the Interstate Commerce Commission before it.

Consequences of the Telecommunications Act

Key elements of the 1996 Telecommunications Act were meant to contain the FCC and establish fair deregulation of the telecom industry. Unfortunately, the act did not establish the means or provide substantive legal authority to enforce its intentions of removing government-protected monopoly franchises in local phone services.

In the years that followed, the FCC created more than 10,000 new pages of rules and regulations. The market share of leading providers grew in major cities. By only repealing part of the 1934 Communications Act, the Telecommunications Act created a litigious and often contradictory regulatory environment.

Internet and Wireless Telecommunications

In 2014 and 2015, the Obama administration pushed to use the FCC as a weapon against major Internet providers. The U.S. government then proposed and eventually passed a rule called net neutrality to reclassify broadband Internet access as Title II or common carrier in 2015.

The move made it unlawful for large Internet service providers to deliberately speed up or slow down traffic to and from websites based on business preferences or user demand. In other words, traffic should be treated indiscriminately. This decision also meant that broadband providers were no longer able to provide different services or charge different fees to users or creators of web content.

The D.C. Circuit Court of Appeals upheld the FCC's plan to repeal most of the provisions of net neutrality in Oct. 2019 but came short of blocking states from adopting open Internet rules. In response, many states responded by introducing their own net neutrality legislation.