Hoosier Telecom Reform Leads Nation

Published May 1, 2006

After more than a few fits and starts, and a nearly fatal derailment in early 2005, Indiana has successfully launched itself into first place in the telecommunications reform race.

On March 14, Gov. Mitch Daniels (R) signed into law the state’s most comprehensive telecom reform bill in two decades, capping more than two years of political brinksmanship. It may be the most far-reaching of state deregulation efforts to date, surpassing Texas as the nation’s leading-edge reformer.

House Enrolled Act 1279, introduced as S.B. 245 by State Sen. Brandt Hershman (R-Wheatfield), chairman of the Regulatory Affairs Subcommittee of the Indiana Senate’s Homeland Security, Utilities and Public Policy Committee, completely revamps the state’s regulatory framework for telecommunications. The legislation dramatically shifts the responsibilities and regulatory scope of the Indiana Utility Regulatory Commission (IURC).

While still retaining its role supervising compliance with state utility law, the commission’s authority to regulate rates for traditional telephone services and telecommunications services is effectively removed after June 30, 2009. In addition, the reforms will


  • prohibit the IURC from regulating broadband services;



  • prohibit the IURC from regulating commercial mobile services;



  • establish a statewide franchising process for video telecommunications services; and



  • require the IURC to biennially identify and remove regulations that no longer serve the public interest.


In the end, perhaps the most surprising result for observers and pundits was the depth of legislative support for telecommunications deregulation. The Senate approved S.B. 245 on a vote of 40-6, while the House approved H.B. 1279 on a vote of 78-18.

Legislative Turnaround

That’s a far cry from where telecom reform ended a year ago. The reform initiative, compromise legislation blending separate deregulation bills sponsored by state Rep. Eric Koch (R-Bedford) and state Rep. Michael Murphy (R-Indianapolis), died in conference committee when chief negotiator Sen. David Ford (R-Hartford City) withdrew his support. Ford didn’t approve of the way the 2005 bill would have limited the ability of local communities to invest in telecommunications infrastructure. Ford also wanted the state to invest in a statewide wireless network, a feature missing from the 2005 bill.

Surprisingly, those issues weren’t the focus of opposition in 2006. Instead, video franchising took center-stage. The Indiana Cable Telecommunications Association unleashed a series of attack ads in January that warned of dire consequences if deregulation were approved. Several major Indiana newspapers were also critical. The South Bend Tribune, for example, editorialized against moving video franchising licensing to the state level, claiming the “IURC does not always appreciate the needs of local communities–certainly not as well as locally elected council members and commissioners do.”

Nor, the Tribune‘s editors wrote, should the state limit the ability of local governments and public agencies to invest in broadband and other technologies since they “are quite capable of determining the scope of their involvement in broadband development.”

On the other hand, Ball State University’s Digital Policy Institute estimated deregulation could save Indiana consumers as much as $262 million on their cable bills because of new competition. Cable rates fell “by 25 percent where direct competition was encouraged and subscribers finally had a choice” after statewide video franchising was implemented in Texas, noted Ball State communications professor Dr. Robert Yadon.

The efficiencies of a statewide franchising system also became apparent to legislators. “Verizon has had a team of 100 lawyers working on local franchises for the last few years,” Bret Swanson, a senior fellow at the Discovery Institute in Seattle, told legislators at a policy forum sponsored by the Indiana Policy Review Foundation in February. “But, by the end of 2005, Verizon had won approval to serve only 40 out of its 10,000 service areas.”

In the end, the governor, Indiana legislators, and public officials were ready to move into the twenty-first century. “We, as a state, have no interest in remaining 34th in the nation on broadband penetration,” said Hershman.

“Would delaying deregulation yet again make Hoosiers feel more secure?” the Indianapolis Star asked in a February 6 editorial in support of the legislation. “Perhaps. But Indiana’s economy is suffering now because state leaders in the past were slow to react to change. The communications sector is growing and evolving. Indiana must adapt, or risk being left behind again.”

Sam Staley ([email protected]) is a senior fellow at the Indiana Policy Review Foundation and director of urban and land use policy at Reason Foundation.