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Press Release

Telecom Backgrounder: What is Illinois Waiting for?


How is technology being regulated in Illinois?

• In 2001, the Illinois General Assembly passed up an opportunity to completely rewrite of the Telecommunications Article of the Public Utilities Act. Portions of the act, which were shoehorned into a 1992 law and will expire this year, were introduced to increase competition in the telecommunications sector. Instead, Illinois’ telecom law has restricted innovation and investment in the telecommunications industry’s infrastructure, preventing millions of Illinois consumers from enjoying advanced technologies such as high-speed Internet service. When they sit down to draft a new law, state lawmakers will have a chance to make good on the already demonstrated promises of deregulation and allow greater competition between companies.

• When the descendents of the original phone companies, now known as Incumbent Local Exchange Carriers, (ILECs), want to develop and offer new products and services to their customers, they need approval from regulators who use rules geared toward technology developed in the 1800s. Because state regulators mandate how the ILECs conduct their business instead of allowing all of the companies to simply compete for the business of Illinois consumers, some companies offering telecom services are able to play by free market rules while the ILECs are not.

• The solution is not to regulate newer companies in the same way established companies have been unfairly handicapped. The solution is to allow free competition between all of the companies offering telecom services and products.

What’s wrong with Regulation?

1. It’s anti-competition and anti-free market.
The market, rather than regulators, should decide which telecom products and services phone companies can offer to consumers. Competition among companies should set the price for those services. Free market competition gives consumers the choice about which company they buy telecom services from, which assures they’ll be offered the best value.

2. It doesn’t keep pace with changes in the industry.
Competition is emerging and growing rapidly from new sources, such as cable, satellite, Internet, and wireless providers. According to the latest available information from the Federal Communications Commission, wireless subscribers in Illinois increased from 3.9 million in 1999 to 6.8 million in 2003, while landline connections have decreased. This trend will continue. So will advances in technology that allow consumers to make telephone calls over the Internet (referred to as Voice over Internet Protocol, or VoIP), bypassing traditional phone networks. Outdated regulation prevents consumers from enjoying the full benefit of wireless and other emerging technologies.

3. It puts Illinois consumers and businesses at a technological disadvantage.
State regulators have forced ILECs to lease their networks to their rivals, which are called Competive Local Exchange Carriers (CLECs), at artificially low rates. Over time, this has discouraged CLECs from investing in their own facilities and innovating. At the same time, the ILECs have little incentive to invest, because they must share their networks with rivals at below-cost rates. Regulation has removed any incentive for anybody to invest in the “last mile,” which connects customers to the network and the high-speed backbone, slowing the deployment of broadband technology. As a consequence, the United States ranks only 11th in the global Digital Access index, which ranks countries based on the ability of individuals to access and use new technologies. The federal government has already taken steps to reduce regulation. Don’t let state regulators block the road to technological advancement in Illinois.

What’s the Solution?

• Illinois legislators should abandon the old model of managed competition in favor of consumer-friendly policies that promote true competition in an open marketplace.

• Eliminating regulatory barriers to broadband deployment will increase investment in broadband technology, providing employment growth and increased output to whichever states eliminate their regulations first. In other words, the first states to scrap outdated anti-technology regulations will draw new businesses to their states and give already established businesses the ability to stay and grow. Two recent studies have suggested full broadband deployment would generate roughly 1.2 millions jobs throughout the nation. An additional study released by Freedom Works Foundation found that widespread broadband deployment would create jobs in all 50 states, including 50,000 new jobs in Illinois.

• When drafting the new law, legislators should allow ILECs and CLECs to negotiate rates for leasing networks, rather than relying on the artificial rates set by regulators – a position supported by FCC commissioners. Some of these negotiations have already taken place successfully. Federal and state regulators should get out of the way and let the marketplace do its work.