Telecom reform progress at long last
State economies around the country are likely to improve thanks to recent legislative action on telecom reform. Ohio, the largest state to pass these reforms thus far this year, leads others that have transported the government's view of the industry into the present.
Last year, The Federal Communications Commission (FCC) overturned much of the regulatory structure upon which state agencies such as The Public Utilities Commission of Ohio (PUCO) rested. Recognizing that new technologies and a vibrant marketplace have transformed the telecommunications industry, the FCC's move sought to shift away from heavy-handed regulatory oversight and price setting.
While some presumed that this would usher in a new era of freedom and innovation, most state regulatory agencies continue to follow a business as usual agenda. Lacking specific legislative language at the state level telling them otherwise, the federal rulings generally have gone unheeded.
In response, state legislators across the country are introducing and enacting a wave of legislation meant to document the need for change. Earlier this year, a host of states weighed bills, and Idaho, Iowa, Alabama, 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.
Basically, the legislation encourages investment by ensuring that the 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 area, the PUCO is now prohibited from exercising jurisdiction over internet-based communications such as Voice-over-Internet Protocol, or VoIP.
The reform legislation also takes a step toward bringing the PUCO up to speed with market realities by following the lead of the FCC. The role of "monopoly czar" is no longer necessary given current market conditions. By transitioning into oversight of competitive forces already at work, the agency will more effectively deliver positive results for consumers and the economy as a whole. For too long, the PUCO has been stuck in a mindset more appropriate to state industrial policies of the 1940s and 50s than the advanced communications landscape of the 21st century.
The legislation further encourages the 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. This narrow focus essentially ignored the many changes taking place around them including cell phones, VoIP and the corresponding entry of cable and electric industries into the marketplace and other developments such as wi-fi that are just emerging.
While work remains to overhaul the structure of state regulatory agencies in Ohio and elsewhere, placing a "cap" on their jurisdiction based on federal standards is a necessary first step to bringing about dynamic economies. 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. While telecom reform might not make major headlines, this little news story will likely yield big benefits for both Ohio's and the country's economy.
