(The following piece was originally published in the
Sept. 1 Detroit Free Press.)
Michigan has had little to celebrate lately, given the
state’s stubborn economic slump. But a recent breakthrough decision by the state
Public Service Commission to end price controls on basic telephone service in 30
cities makes Michigan a leader among states in fostering telecommunications
investment and innovation. The Michigan Legislature must now build on this
Rate regulation is a relic of the days when "Ma Bell"
reigned as a government-sanctioned monopoly. Today, no less than 63 companies
provide basic telephone service to 36 percent of the customers in the 30-city
region, which covers most of metropolitan Detroit and parts of Washtenaw County,
Flint and Grand Rapids. Competition also is fierce among wireless and
Internet-based telephone services.
Consumers need not worry that their rates will skyrocket.
The unparalleled choice of telecom options will impose rate discipline far more
effectively than the state government bureaucracy, which has often inhibited
firms from responding quickly to consumer preferences. Freed from price
controls, service providers will be able now to offer a range of flexibly priced
service packages as demand dictates. Innovation and investment are sure to
The Public Service Commission has taken its fair share of
lumps in recent years for routinely indulging in regulatory excess. But in this
instance, Commission Chairman Peter Lark and newcomer Monica Martinez have
benefited the public and demonstrated true leadership by providing the votes
necessary to end the commission’s regulatory control.
Significant as this new rate deregulation is, however, it
is limited to 30 cities and does not address the myriad regulations that
frustrate broadband deployment and other telecom advances. It is now up to the
Michigan Legislature to institute reforms that would enhance all telecom
The sunset this year of the Michigan Telecommunications Act
provides lawmakers the opportunity to remake the state as a model for technology
investment. Michigan simply cannot afford the cautious approach advocated by
those with a stake in the status quo. Indeed, researchers at the Massachusetts
Institute of Technology recently concluded that incremental reform increases the
likelihood of policy missteps.
"Quick and complete deregulation may not be risk free,"
said MIT professor Charles Fine, "but our research in other industries indicates
it is preferable to stretching deregulation out over many years through a
piecemeal and incremental process if vigorous competition already exists."
Legislation introduced by
Michigan Rep. Leon Drolet and Sen. Shirley Johnson would, if enacted,
dramatically improve Michigan’s regulatory environment. Both bills call for
eliminating the authority of the Public Service Commission to control the rates
and terms of telecommunications services. The commission would retain authority
to regulate public safety services, such as "911" access, as well as consumer
protection against fraud.
This is precisely the direction taken recently by the
Federal Communications Commission in recognition of the robust competition in
the telecom market nationwide. In a dramatic policy reversal, for example, the
federal commission earlier this year largely eliminated the "forced access"
requirements that compelled traditional wireline phone companies to share their
local calling networks with rivals at below-cost rates. Subsequently, the
commission likewise exempted both cable and wireline companies from having to
share their broadband networks with internet service providers who lack lines
and other transmission infrastructure of their own.
Congress conceived forced access as necessary to jumpstart
competition in local calling services. Lawmakers assumed that once new entrants
gained market share, they would build new facilities to compete against
incumbent wireline networks. But as documented in a 2003 study by the Mackinac
Center for Public Policy, most competitors in Michigan shunned investment in
independent facilities, preferring instead simply to resell the network services
they obtained at a discount, compliments of regulatory fiat. This outcome is
precisely the opposite of what Congress intended. And it is a significant factor
impeding telecom investment and economic growth.
By lifting price controls in Southeast Michigan, the state
Public Service Commission has recognized the supremacy of the market in
maximizing the availability and affordability of telecom services. Lawmakers
would do well to follow suit and heed the advice of former U.S. House Majority
Leader Dick Armey, who spoke on telecom issues at a May luncheon in Lansing.
"As you review telecommunications law in Michigan," Mr.
Armey said, "you have the opportunity to bring your legal structure up to the
promise of the electronic revolution in the 20th century. But if you’re going to
have the same telecommunications regulations that you had after World War II,
you are not going to be competitive with the rest of the world."
Just so. It’s time for the state Legislature to free
Michigan’s telecom market and open the state to innovation, investment and job
Diane S. Katz is director of science, environment and
technology policy at the Mackinac Center for Public Policy, a research and
educational institute headquartered in Midland, Mich. Permission to reprint in
whole or in part is hereby granted, provided that the author and the Center are