Unnecessary telecom regulations hurting Illinois

Hance Haney and George Gilder
News-Gazette
March 21, 2010
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The National Broadband Plan presented to Congress on Tuesday by the Federal Communications Commission aims to connect every U.S. household to the fastest broadband as soon as possible, a goal which the agency's staff estimates could cost $350 billion.

Much of that investment will have to come from private industry, agency officials have conceded. This month, the Discovery Institute conducted a study for the Illinois Technology Partnership, the Illinois State Black Chamber of Commerce and the Illinois Hispanic Chamber of Commerce that found simple updates to the Illinois Telecommunications Act will spur this critical, private sector investment in broadband infrastructure which will lead to job creation and retention in Illinois. 

Every resident of Illinois and the nation should have access to broadband, which offers new opportunities to get a job or start a business. It is most valuable where other opportunities for wealth creation are least available, such as in disadvantaged communities and rural areas.

Although Illinois was a leader in 1985, when the General Assembly declared that "competition should be pursued as a substitute for regulation," delivering new technologies, improved service quality, choice among telecommunications providers and ultimately lower prices for consumers, not much has changed.

Telecommunications providers in Illinois remain subject to unnecessary and anticompetitive legacy regulation which depress industry valuations and compromise the ability of these firms to invest. And there is no statutory prohibition which would prevent the Illinois Commerce Commission from enveloping wireless, Voice over Internet Protocol and even broadband services, which have been thriving without any regulation.

The study cites a report by Connected Nation, which projects an additional $6.2 billion in economic impact annually from increased broadband availability and use in Illinois - including an estimated 105,622 jobs created or saved per year throughout the state's economy.

These jobs are created or saved not only in communications equipment and services, but also in manufacturing and service industries (especially finance, education and health care).

If legacy telephone regulation is not reformed and the possibility that other market participants could face similar regulation is not eliminated, these estimated benefits could be at risk. Continued regulation jeopardizes competition which leads to benefits and savings for consumers by creating artificial competitive advantages and disadvantages for providers. Regulation is no longer necessary to protect telephone customers. Most now all have a choice of providers. Competition has pushed down the rates for bundles of Internet, phone and TV service by up to 20 percent in 2008 - to as low as $80 per month - according to Consumer Reports, which reported last month that, shopping for Internet, home phone, and TV service is increasingly a "buyer's market."

Comprehensive regulation simply limits the ability of a regulated entity to improve its products and services and adjust its pricing in response to competition.

All providers of voice services should be subject to minimum regulation which does not discriminate on the basis of technology or history. By removing the statewide cobwebs of regulation that afflict telecom and could ensnare its competitors, Illinois can turn itself into a magnet for private investment needed to open new technological opportunities and economic efficiencies that promise enormous dividends.

The alternative is to accept the unnecessary risk of diverting investment - and jobs - to another such as Indiana or Michigan that have updated their telecom statutes.

Hance Haney is director and a senior fellow of the Technology & Democracy Project at the Discovery Institute. He advised the chairman of the Subcommittee on Communications of the U.S. Senate during the deliberations leading to the Telecommunications Act of 1996. He subsequently held various positions with the U.S. Telecom Association, U S WEST, Inc. and Qwest Communications.

George Gilder is a senior fellow at the Discovery Institute and the founder of Discovery's Technology & Democracy Project. He is also chairman of George Gilder Fund Management, LLC and moderator of the Gilder Telecosm Forum. His best-selling book. Microcosm (1989), explored quantum roots of new electronic technologies.  A subsequent book. Life After Television (1990), was a prophecy of the future of computers and telecommunications and a prelude to his book on the future of telecommunications, Telecosm (2000).