State Legislators Agree: Time for Telecom Reg Reform

August 06, 2004
Joseph Bast

Last month, the two largest membership organizations for state elected officials in the U.S. adopted resolutions advocating major deregulation of the telecommunications industry--evidence that a national consensus is emerging over what was once a divisive and volatile issue.

The National Conference of State Legislatures (NCSL) and the American Legislative Exchange Council (ALEC) don't normally arrive at the same conclusions when they adopt policies. Because NCSL's leadership tends to be liberal and ALEC's tends to be conservative, the two organizations often issue conflicting resolutions.

This year, however, the two organizations issued surprisingly similar resolutions concerning the need for reform of the nation's federal and state telecommunications regulations. NCSL's resolution calls for "a total reconsideration of the 1996 Telecommunication Act to include all providers to telecommunications, including incumbent and competitive wireline carriers, wireless carriers, and cable and Internet telephony providers."

ALEC issued a resolution calling for "phasing out historic subsidy systems" and "support for balanced and minimal telecommunications regulations that more accurately reflect today's competitive situation in a particular marketplace."

Both organizations observed that technological change has replaced the telecom monopolies with vibrant cross-platform competition. ALEC's resolution reports "the rise of varied competition among numerous competing technologies has brought increased consumer choice in many marketplaces," while NCSL finds "competition also has occurred as a result of increased consumer access to wireless services and the ability of consumers to communicate over the Internet through Instant Messaging, e-Mail, and now Voice over Internet Protocol (VOIP)."

ALEC says "full and open competition, not multiple layers of regulation, should drive healthy and sustainable competitive marketplaces." Similarly, NCSL says "government and industry should strive for a telecommunications policy framework that promotes and ensures fair and open competition, removes obsolete barriers that result from outdated burdensome regulation and requirements, ensures similar government regulation for all technologies that provide similar services, encourages innovation and investment, and allows consumers and the marketplace to determine winners and losers not government regulation."

These resolutions mark something of an epiphany in the debate over telecommunications regulation. Since passage in 1996 of the Telecommunications Act, debate has focused on the prices "Baby Bells"--BellSouth, Verizon, SBC, and Qwest--are required to charge competitors to use their copper-wire networks to reach customers. The goal was competition, the means were bureaucratic rather than market-oriented.

Regulators, under pressure from elected officials and editorial writers, were biased in the direction of setting the prices too low. Uncertainty over the legality of the regulatory regime caused investors to stay on the sidelines, withholding billions of dollars in investment needed to build infrastructure for broadband services. As a result, the telecom industry in the U.S. has fallen behind other developed countries according to numerous measures of broadband penetration. Investors and consumers have been penalized by a dysfunctional regulatory regime.

The ALEC and NCSL resolutions reveal a determination by the nation's state elected officials to move beyond the old debate, first by recognizing that technology has reduced the importance of who controls the old copper-wire network--there are now more wireless cellphone users in the U.S. than there are wireline phone users--and second by viewing regulations, subsidies, and telecom taxes as barriers to competition and innovation.

The coming year will see the beginning of a campaign to replace the Telecommunication Act of 1996 with new federal regulation that completes what that act started: Deregulation of an industry that is critical to the country's competitiveness and productivity in the twenty-first century. That the nation's state elected officials are on board and supportive is good news indeed.


Joseph Bast is president of The Heartland Institute and publisher of IT Update, a monthly newsletter on telecom and information technology issues. His email address is jbast@heartland.org.