Ohio Recognizes the New Telecom Era

Published August 1, 2005

State economies around the country are likely to improve thanks to recent legislative action on telecom reform. Ohio, the largest state to pass reforms so far this year, leads others that have transported the government’s view of the industry into the present.

The reform legislation takes a step toward bringing the Public Utilities Commission of Ohio (PUCO) up to speed with market realities by following the lead of the Federal Communications Commission (FCC). Last year, the FCC overturned much of the regulatory structure upon which state agencies such as PUCO rested. Recognizing that new technologies and a vibrant marketplace have transformed the telecommunications industry, the FCC sought to shift away from heavy-handed regulatory oversight and price-setting.

In this new competitive environment, Ohio’s legislators realized PUCO’s role of “monopoly czar” is no longer necessary. By transitioning into oversight of competitive forces already at work, PUCO will more effectively deliver positive results for consumers and the economy as a whole.

The legislation further encourages PUCO to recognize these advanced communications as part of the competitive marketplace when considering regulatory action. Up to now, agency officials focused solely on wireline technology in crafting rules. That narrow focus essentially ignored the many changes taking place around the regulators, including cell phones, Voice over Internet Protocol (VoIP), wireless Internet, and the entry of cable and electric utilities into the marketplace.

In response, state legislators across the country are introducing and enacting a wave of legislation meant to document the need for change. Alabama, Idaho, Iowa, North Dakota, Tennessee, and Utah all signed telecom reform into law.

As in these other states, legislators in Ohio chose to adopt the FCC’s position. In a state suffering from declining investment in basic infrastructure as a result of below-market price-setting, the need for a reform was clear. The Ohio House voted 81-13 and the Senate voted 30-2 to adopt the bill.

The legislation encourages investment by ensuring that PUCO follows federal law in its actions. Requirements or prices for network elements, resale of telecom services and network interconnections, for example, cannot exceed or be in any way inconsistent with the more restrictive federal regulations. And, despite designs it once held to expand its oversight into this arena, PUCO is now prohibited from exercising jurisdiction over Internet-based telecommunications such as VoIP.

While work remains to overhaul the structure of state regulatory agencies, placing a “cap” on their jurisdiction based on federal standards is a necessary first step. Ohio, a state once known for having a restrictive regulatory and price-setting environment that undermined competition and innovation, can now begin fostering a reputation for welcoming entrepreneurial investment.

Matthew S. Hisrich ([email protected]) is a policy analyst with The Buckeye Institute for Public Policy Solutions.