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A warning about future telcom "reform"?

By Scott Bradner

There is an almost universal feeling that the current US Federal telecommunications laws and regulations are way out of step with current telecommunications reality. The basic law was passed in 1934 and updated by the Telecommunications Act of 1996, which is eons (or longer) ago when it comes to telecommunications technology. No one I know is looking forward to the prospect of Congress, outnumbered as it is by lobbyists, trying to "fix" the current mess. If anyone did have any hope that such a process might result in a positive outcome recent events in Pennsylvania will have extinguished them.

The Pennsylvania legislature, after more than a year and a half of trying, recently passed House Bill 30 (http://www.legis.state.pa.us/WU01/LI/BI/ALL/2003/0/HB0030.HTM) that updates the existing Pennsylvania telecommunications regulations. This bill got a lot of press in mid November because of a provision that was added late in the game that prohibits municipalities from offering "any telecommunications services, including advanced and broadband services" for a fee without basically getting the permission of the local monopoly telephone company. It's probably not a coincidence that this provision showed up around the time that Philadelphia announced a plan to offer cheap city-wide WiFi-based Internet service. This provision was clearly added to protect local monopoly telephone companies such as Verizon (which provides telecommunications services in Pennsylvania) from municipal-based competition. Under the provision, Verizon could block any future deployment of municipal-run networks by saying that they were going to offer similar speed Internet services in the same area, even if Verizon's services were not going to be available for years or were going to cost a hundred times what the municipal-run network was going to charge its customers.

This provision almost perfectly symbolizes the entire bill.

The bill starts out with a bunch of good sounding platitudes describing how the bill aims to ensure that Pennsylvania will get the best telecommunications services that Verizon decides it wants to deliver. Opps, that is a bit sarcastic, but that is what I feel like being when I read this type of bill. Telecommunications bills like this are ostensibly for the good of the public but in actuality mostly benefit two monopolies -- the regional telephone company and the utility regulators. There is very little in this bill that will benefit the ordinary citizens of Pennsylvania. They will get higher prices and little innovation.

The bill includes some bribes to get specific groups to support it. For example it establishes an educational technology fund (the e-fund) to support things that educators like. The level and passion of support from some people in the educational community for the bill shows that this type pf payoff works. Of course the money has to come from somewhere and it will come from higher phone costs for the residents of Pennsylvania than they otherwise would have. In other words, the e-fund and other similar goodies in the bill are supported by yet another tax on telephone users.

What is missing from this bill is any hint that the best way to get innovation and lower prices in telecommunications would be to encourage competition for basic phone service but that would threaten both the main beneficiaries of the bill.

This bill is the result of a perfect storm of telcom regulators and big telcom lobbyists. But this storm is a local squall in comparison to the category 4 hurricane that will spring up when Congress starts to revamp federal telcom law. It will be very ugly and you can be sure the beneficiaries will not be you and I.

disclaimer: Studies show that Harvard brings big benefits to the community (http://www.news.harvard.edu/gazette/daily/2004/11/19-econ.html) but not all of the community agrees. In any case the above discussion of benefits is my own opinion and not the University's.