- The Washington Times - Thursday, May 27, 2004

State governments are getting in the way of major telecom decisions and seriously setting back America’s competitiveness. For the nation to continue its global economic dominance in the information age, it will be necessary to keep an edge in the access individuals and businesses have to information. We are now lagging behind. In broadband penetration, for example, the United States ranks a lowly 10th, behind such countries as Denmark, Sweden, Iceland and Belgium, which are hardly economic powerhouses. Sleeping Asian tigers are also ahead of America. To reverse the trend, the states’ ability to regulate new technology will have to be curtailed.

A decision earlier this month by the New York State Public Service Commission exemplifies what is wrong with the current regulatory environment. New York declared that Vonage, an Internet phone provider, is a telephone service. The ruling asserts the state’s jurisdiction over the new technology, which means it can regulate and tax it. The state’s claim ignores the borderless nature of the Internet, which is inherently interstate and international in its operations. With the possibility of all 50 states scrambling to get their own piece of the profits from new technologies, the risks of tying up innovation with red tape are all too real.

States are becoming increasingly meddlesome in their attempts to maintain government’s role in the ever-changing world of telecom policy. In California and Michigan, public utility commissions recently ruled that the states have a say when phone companies make private deals to resolve disputes regarding the access long-distance companies have to reselling traditional local phone service. Michigan and California insist that such private business deals are somehow open to public scrutiny because of the “public interest.” Of course the real public interest is in having the states keep their hands off technological progress.

Technology has increasingly made traditional notions like borders irrelevant. Cell phones, for instance, essentially no longer distinguish between local and long-distance calls. As more borders and barriers are erased, so is the relevance of the local regulator. Instead of recognizing and accepting this eventuality, the bureaucrats are busy cooking up new barriers that will allow them to impose regulations where they don’t belong. The status quo, whereby new technologies and companies offering new telecom services can be regulated and taxed in 51 different jurisdictions, is not a policy befitting the world’s greatest economy. Sen. John Sununu and Rep. Cliff Stearns are pushing legislation to free Internet phone services from regulation. Both bills would be a good start to keeping America competitive in the information age.

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