Government Should Recognize the Consumer-Driven Revolution in Communications

Government Should Recognize the Consumer-Driven Revolution in Communications

Right now we are in the midst of a revolution in communications. Dynamic changes and improvements in technology have revolutionized the way we live and work. With each passing year, consumers are able to communicate with each other and conduct business faster, at lower cost, and more productively, with virtually anyone in the world. What was once the stuff of science fiction is now reality for millions of U.S. citizens. But will government see how the world has changed?

Consumer demand for new and better communications service is driving fierce competition in the marketplace between private sector providers. Consumers can now choose among telephone, cable, satellite, and wireless providers for communications. But there are challenges that could slow the technological revolution and the consumer benefits that follow. The greatest challenge is the friction between rapidly changing technology and laws that fail to keep pace with change.

In many states, laws and regulations governing communications are long out of date and in serious need of reform. Many of these laws and rules were written when “Ma Bell” was the only provider available and the only service was a rotary telephone. These laws set up interventions such as price controls, service requirements, costly mandates, and burdensome regulations, many of which have outlived their usefulness.

When these laws were written, no one had heard of broadband and the only wireless device available was a walkie-talkie almost the size and weight of a cinder block. As a result, state communications laws and regulations largely fail to reflect the current marketplace or consumer-driven trends such as demand for broadband and wireless.

Major Reform Bills Pending
The data show just how much the world has changed. In 2004 the Federal Communications Commission found the number of wireless consumers eclipsed the number of plain old telephone service lines. Between June 2006 and June 2011, the number of wireless subscriber connections jumped from almost 220 million to 323 million, and the percentage of U.S. households that were wireless-only rose from 10.5 percent to 31.6 percent. It is common sense that state laws should reflect this new technological reality.

To ensure the competition continues and consumer benefits continue to flow, states need to weed out examples of old rules that focus on what providers can and cannot do, and allow providers to deliver the best services to consumer. States should recognize the trends underway in communications, such as rapid innovation and convergence, and take a “light touch” approach to laws and regulations.

Reforms to old communications laws should be broad and technologically neutral and eliminate artificial distinctions between services and providers. Additionally, reforms should recognize consumer substitution as competition.

Recently, several states have made great strides in updating and reforming their communications laws to eliminate barriers to providing the best products at the best prices to the most consumers. In 2010 alone, at least five states enacted laws to reform communications. In 2011, at least ten states undertook similar reforms, including Florida, Kansas, Maine, North Carolina, Texas, and Wisconsin. Major reform bills are currently pending in California, Connecticut, Georgia, Mississippi, and Ohio.

Antiquated Laws and Rules
States should also resist calls to pass laws that regulate providers’ business decisions and aspects of the marketplace such as pricing, quality of service, and the technology service providers can use. In particular, states should refrain from applying the old models of laws and regulation to new technologies.

Using antiquated laws to regulate new technologies creates great uncertainty in the marketplace, which raises costs for providers and consumers. Communications providers are forced to spend huge sums of money to comply with rules that do not account for the characteristics of new technologies. Unfortunately, providers have little choice but to raise prices on consumers or stop offering a product or service altogether to account for the compliance costs.

Across the country, states are responding to consumer demands for better, faster, cheaper communications services by enacting forward-looking reforms that move away from rules designed for the Ma Bell era. These antiquated laws and rules were made when consumers lived in a much less vibrant marketplace. Now, with many services fiercely competing for our attention, consumers are cutting the cords or choosing to embrace new communications technologies.

New laws and rules are harnessing market forces such as competition that keep prices in check and foster innovation for new and better communications services. Additionally, these new rules provide regulatory clarity and certainty for providers and new entrants, which in turn drive further investment, competition, and innovation. Ultimately, consumers benefit from the fierce and growing competition underway through lower prices, better service, and more choices.

John Stephenson (jstephenson@alec.org) is director of the Communications and Technology Task Force at the American Legislative Exchange Council. Learn more at http://www.alec.org/.