It’s Up to the States to Blaze Fiber Trail
Discussions about the future of America’s telephone systems have begun to sound eerily similar to breakfast cereal commercials. Now with fiber . . . !
Techno-pundits and policy-makers love to extol optical fiber as the “Highway of the Information Age”--the medium that will comfortably carry all the torrents of video, imagery, bits, bytes and conversations that our new technologies will generate. Linking our homes and businesses with fiber, these experts say, will transform our lives just as surely as wiring them with phone lines and cable television did.
Some folks are so enthusiastic about fiber that they’re even prepared to cut political deals to get it. New Jersey recently passed legislation sponsored by New Jersey Bell that gives the telephone utility greater flexibility in pricing in exchange for kicking in an extra $1 billion to help lay fiber over the entire state by the year 2010. West Virginia has a similar arrangement.
In fact, more than half the 50 states now offer their telephone utilities some form of what’s called “incentive” regulation. In contrast to the historic regulatory approach of giving the phone company a specific rate of return, companies are now being given economic incentives to improve operating efficiencies and phase in fiber.
But these piddling deregulatory steps really miss the essential point. The legal reality is that state public utility commissions have both the opportunity and discretion to craft policies that could dramatically enhance the quality of their telecommunications networks. The regulatory focus today shouldn’t be primarily on rate regulation but on economic development and infrastructure. There is no good reason why state regulatory commissions shouldn’t aggressively be prodding their telephone companies to offer new technologies and new services to their customers.
“Right now, the states are in the best position to create the telecommunications future,” says Richard Wolf, a consultant with LaBlanc & Associates, a New Jersey-based telecommunications consulting firm. “We may be seeing 50 different experiments.”
To be sure, fiber isn’t enough. Neither is Caller ID. It’s time for a little ambition here. What’s needed is a policy that explicitly recognizes the role that telecommunications technologies can play in making people’s lives easier. Surely there are few populist commissioners with the neurons and spinal column to understand that.
In California, everyone recognizes that traffic congestion is almost as bad as the air quality--or is it the other way around? Why isn’t California’s Public Utilities Commission--in cooperation, perhaps, with the South Coast Air Quality Management District--creating regulatory incentives to get businesses and Pacific Bell to explore telecommuting options? The commission could no doubt require Pacific Bell to create special rate structures for businesses that wanted to explore video conferencing, computer conferencing and other forms of teleconferencing. Why isn’t this on the agenda? Or is everyone from Los Angeles to Sacramento simply waiting for the big boys in Washington to step in?
“State commissions should absolutely be exploring telecommuting,” asserts Eli M. Noam, a Columbia University professor who served on New York state’s public utility commission. “In the past, of course, these commissions were set up to prevent monopoly abuse--to prevent bad things from happening. Today, they need to start to think about how they can help make good things happen, as well. They need to create a climate of innovation where experiments and trials can be conducted with fewer regulatory battles.”
State regulatory commissions should also be pushing their phone companies to offer customers access to video services. For example, if Blockbuster wants to set up a “trailer channel” that people could call up and watch (think of it as a 900 number for video), then they should be able to do so. The Cable Act of 1984--arguably one of the most moronic, anti-consumer, anti-innovation pieces of legislation ever excreted from Washington--ostensibly prevents telephone companies from getting into the cable television business. Politics aside, there is no good technical reason why phone companies shouldn’t be allowed to provide--on a non-discriminatory, common carrier basis--video services. So if Paramount Pictures or Disney wants to set up a local 900 video line for Californians, they should be able to do so.
As Federal Communications Commission official Robert Pepper observes, if these data pipelines can carry sound and photos and text, why not video as well? “You’d need ‘the bit police’ to inspect all the data to see that no one was breaking this law,” he observes.
To be sure, the reason why these phone companies remain regulated is that they are still monopolies. The ultimate future may be a time when competition breaks the monopoly of the local phone companies as surely as divestiture broke the monopoly on long-distance service. But, for the time being, if there’s going to be a telecommunications revolution, the states--not the federal government--are in the best position to lead it.
