The growth of data networks like the Internet are an increasingly important motivation for regulatory reform of telecommunications. A primary principle of the current regulatory structure, for example, is that local phone service is a natural monopoly, and thus must be regulated. However, local phone companies face ever-increasing competition from data network services. For example, the fastest growing component of telephone demand has been for fax transmission, but fax technology is better suited to packet-switching networks than to voice networks, and faxes are increasingly transmitted over the Internet. As integrated services networks emerge, they will provide an alternative for voice calls and video conferencing, as well. This ``bypass'' is already occurring in the advanced private networks that many corporations, such as General Electric, are building.
As a result, the trend seems to be toward removing barriers against cross-ownership of local phone and cable TV companies. The regional Bell operating companies have filed a motion to remove the remaining restrictions of the Modified Final Judgement that created them (with the 1984 breakup of ATT). The White House, Congress, and the FCC are all developing new models of regulation, with a strong bias towards deregulation (for example, see the Senate Bill 652, passed on 15 June 1995).
Internet transport itself is currently unregulated. This is consistent with the principal that common carriers are natural monopolies, and must be regulated, but the services provided over those common carriers are not. However, this principal has never been consistently applied to phone companies: the services provided over the phone lines are also regulated. Many public interest groups are now arguing for similar regulatory requirements for the Internet.
One issue is ``universal access,'' the assurance of basic service for all citizens at a very low price. But what is ``basic service''? Is it merely a data line, or a multimedia integrated services connection? And in an increasingly competitive market for communications services, where should the money to subsidize universal access be raised? High-value uses which traditionally could be charged premium prices by monopoly providers are increasingly subject to competition and bypass.
A related question is whether the government should provide some data network services as public goods. Some initiatives are already underway. For instance, the Clinton administration has required that all published government documents be available in electronic form. Another current debate concerns the appropriate access subsidy for primary and secondary teachers and students.