Innovation Moves at Internet Speeds, but Kentucky’s Regulations are Stuck in the Past Century

Copper wires were used to connect the first telephone customer in the U.S. and that copper technology remains the basis of today’s telephone services in Kentucky some 136 years later.

It’s not like there hasn’t been impressive innovations in communications; there has. In just the last 10 years, 640 thousand fixed broadband subscribers and 2.4 million wireless subscribers were added statewide, including 1.3 million additional wireless high-speed connections. In fact, there are now more broadband and wireless connections in the state of Kentucky than there are residents.

Today, consumers can browse the Internet, watch videos, use apps like free navigation, make phone calls and send messages with a handheld device. Half of Americans use their wireless phone as their predominant telecom service; and, according to the latest twelve-month estimate, the US consumers sent and received 1.2 trillion megabytes of data – all wirelessly. Internet devices assist doctors in remote medical monitoring of patients; give students access to online coursework and reading materials; enable workers to telecommute; and allow consumers to shop, bank and communicate.

Consumers are demanding more, better and faster service, but there is a problem. Regulations dating back generations are still in place that keep telecommunications providers focused on maintaining and investing in the old copper-based network, instead of encouraging investment in Internet Protocol (IP) fiber and wireless-based networks.

One regulatory rule, a relic from the Old Bell System, sometimes referred to as carrier of last resort obligation, works to divert network investment away from newer technologies in favor of older technologies. That raises network costs, which discourages investment and raises consumer prices. Either way, these regulations mean that the transition from old technologies to new technologies is delayed.

Moreover, the added expense of updating and maintaining two capital-intensive networks means that network costs will increase, and less will be invested in broadband and wireless infrastructure. That puts a hold on services like telemedicine, distance learning, telecommuting applications and other high-tech services. It means that consumers in Kentucky will get less of the IP-based services they so demand.

Given the level of competition from cable, broadband and wireless platforms, the “carrier of last resort obligation” provides no benefits to consumers, but it does produce economic costs. According to the Bureau of Economic Analysis, the jobs and economic output resulting investment in broadband services is greater than an equally-sized investment in standard telecommunications. Therefore, regulations requiring telecommunications providers to invest in outdated copper technologies sacrifice economic growth and jobs in the state. Reform is needed to end these outdated rules, while allowing the Kentucky Public Service Commission to be involved in retail service issues resolution. Reforms have been done in 22 states so far, and no consumer has been left behind.

Innovation moves at Internet speeds, but regulations seem stuck in the past century. The consequence of maintaining archaic regulations means less investment, fewer jobs and delays for consumers in the state. Today, consumers are shunning the old copper network and demanding broadband and wireless services. It’s time to encourage investment in what Kentucky’s consumers really want.

Steve Pociask is president of the American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization. For more information, click here.

This blog was published in Kentucky Forward, and can be found on their website.

 

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