Relax (Regulation) and Map a Road to Economic Recovery

January 22nd, 2010 by Leave a Comment

By Mike Klein

Economies require technology just as mammals require oxygen. In effect, technology is the oxygen from which economic progress is derived. If you wonder about that idea, consider that Soviets launched the first man into space through Kremlin willpower but Americans landed the first men on the moon. The marketplace of ideas in the United States provided the superior research and technology that enabled the U.S. space program to overcome the Soviet albatross.

Lately we are forced to become accustomed to some fairly terrifying economic challenges: big recessions, millions of lost jobs and the loss of vast amounts of accumulated wealth. Governments are being overwhelmed by growing service demands and shrinking tax bases. Politicians challenged to create new ideas often look elsewhere to see what the other guy is doing.

All the while, technology marches forward and clears a path to future success.

Technology innovation is the gospel preached by George Gilder, the internationally acclaimed economist, author and former Reagan administration policy confidant who spends much time thinking and writing about technology.

The Gilder view is, “I always say don’t solve problems. When you solve problems you end up feeding your failures, starving your strengths and creating a costly mediocrity. Don’t solve problems. Pursue opportunities.”

Gilder is co-author of “Georgia’s Unfinished Telecom Agenda,” a new Discovery Institute white paper that discusses how telecommunications industry regulatory reform could help grow Georgia’s current economy and protect it against future downturns.

Addressing the first Georgia Public Policy Foundation Leadership Breakfast of 2010 on January 7, he provided a stirring analysis that should awaken any Georgian. “Georgia: A moment of truth here. Georgia has been lagging in deregulation. The Discovery Institute shows that you are way behind Alabama. That should be a wake-up call.”

The Discovery Institute report compares Georgia’s telecom regulatory environment to several Southern neighbors. The comparison is none too flattering. Alabama exempts telecom services from state public service commission jurisdiction beginning January 2011. Florida, North, Carolina, South Carolina and Tennessee have all made changes to loosen jurisdiction.

“Meanwhile,” the report states, “Georgia’s telecommunications providers remain subject to unnecessary and anticompetitive regulation which depresses industry valuations and thus investment.” Charter Communications, Comcast, Cox, Mediacom and Time Warner have pieces of Georgia’s telecom industry, as do mobile giants AT&T, Verizon, Sprint and T-Mobile, along with smaller competitive local exchange carrier companies such as Clearwire and CBeyond.

The explosion of broadband technology is largely a 21st-century phenomenon, and an extraordinary one. Two percent of the U.S. population utilized broadband services when the new century began; 60 percent do today. Wireless bandwidth growth was 542 percent over the same 10 years.

Google – the company whose name eventually became a verb, as in “Google it!” – is entirely dependent on broadband technology. Apple and every other smart (or other) mobile phone manufacturer have business models based on ever-expanding available bandwidth. Internet-based classrooms are bandwidth-based models. So are internet traffic reports. Homes have become internet hubs that increasingly support their own household networks.

Gilder and the study’s co-author, Hance Haney, identified Georgia’s “statewide cobwebs of regulation” and made five proposals they maintain could “expand customer choice, decrease prices, and ignite the broadband expansion necessary to economic growth:” 

  • Allow pricing freedom that permits development of customized service offerings.
  • Reduce inflated intrastate access charges for smaller rural providers and new entrants.
  • Eliminate filing requirements that ensure rivals receive detailed information about a competitor’s new or improved services or products.
  • Eliminate utility commission jurisdiction for numerous consumer issues.
  • Terminate provider-of-last-resort obligations and their associated costs that are not equally imposed on all providers. 

Gilder and Haney predict elimination of Georgia’s “cobwebs of regulation” would create “at least $3.3 billion over the next five years in the form of lower prices for voice services, plus an additional $3.9 billion in economic impact annually from increased broadband availability and use – including 71,059 new jobs per year.”

“These reforms aren’t novel or unprecedented,” they note. “By simple reforms of outmoded laws, Georgia can ignite a new spiral of innovation and revival based on new technologies and services tapping into new worldwide webs of glass and light and air.”

It’s not rocket science. While the nation struggles to recover from the recession, Georgia has an opportunity to simply relax regulation to expand economically.  Or, to borrow a “smart” phrase, “There’s an app for that.”

Discovery Institute reports are located at www.discovery.org.


 

Mike Klein, a journalist, writer, producer, communications specialist and member of the Georgia Public Policy Foundation, wrote this commentary for the Foundation. The Foundation is an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (January 22, 2010). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.

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