The regulatory process always trails the pace of technological change. In the case of telecommunications, the regulatory regime of price controls, service mandates and marketing restrictions imposed decades ago has been overtaken by the abundant, affordable telecom options available today. No longer are consumers at the mercy of the government-sanctioned “Ma Bell” monopoly. Competition among various technologies and providers has rendered rate regulation and service boundaries wholly obsolete.

Telecom policy need not be complex if guided by basic economic principles.

There is, therefore, considerable opportunity to improve telecommunications policies at both the state and federal levels.

At the federal level, the regulations governing competition in local calling over the traditional wireline network were recently overturned as arbitrary and overreaching by the U.S. Circuit Court of Appeals in Washington, D.C. This marked the third time in eight years that these federal rules were judged improper. Subsequently, both the Federal Communications Commission (FCC) and the Bush administration decided — wisely — against an appeal, thereby opening the way for much-needed reforms.

At the state level, Michigan’s Telecommunications Act is slated to sunset on Dec. 31, 2005. In devising a statutory update, legislators have the opportunity to abolish antiquated regulations that have inhibited innovation and undermined telecommunications investment and job creation in the state.

Transforming telecom policies will demand aggressive oversight of regulators by lawmakers, the media and the general public. Resistance to reform will run strong among those with a vested interest in the status quo. But enhancing consumer benefits and technological innovation matters far more than preserving regulators’ powers or special-interest advantages.

Recent events have illuminated the path to progress. Shortly after the FCC’s rules on competition in local calling were overturned, executives of the “Baby Bells” called upon their rivals to negotiate commercial agreements for network access without government interference. Within days, SBC Telecommunications Inc. and Sage Telecom Inc. struck an agreement, while Verizon and BellSouth have also announced agreements with wholesale customers both large and small.

The message is unmistakable: “This is proof positive that free markets can work in telecommunications as they do throughout the U.S. economy,” said Walter B. McCormick Jr., president and CEO of the United States Telecom Association. “This is real-world evidence that we do not need to spend months and years in court defending the past and putting future telecom investment and job creation on hold. All it takes to move forward constructively for the country is reasonable people sitting down in good faith at the negotiating table.”[5]