Why We Need A New Telecom Law Now

Why We Need A New Telecom Law Now

February 7, 2006

I’m writing this from Beijing where the Chinese government understands that a world class fiber optic telecom network is the key to economic growth. If we want to stay competitive in the 21st century, it’s time our government learned the same lesson.

This year Congress can set aside partisan politics and choose growth and prosperity for U.S. citizens by passing a new telecom law. A legislator who votes to continue second guessing innovation and regulate communications technology is voting to send U.S. businesses and jobs overseas. It is time for the U.S. to take a stand for growth.

Telecom is the central nervous system of today’s global economy; it is the way all businesses communicate and do business with our workforce, our suppliers, and our customers. Fast, accurate communications networks have become a crucial competitive tool. It is important that our businesses have the tools to compete for customers to keep jobs and paychecks growing here at home.

Inadequate investment in high-speed telecom networks undermines our competitiveness. For the past decade, policies in Washington have discouraged investment by undermining the return on capital invested in US telecom assets. During that time the US has gone from first place to 14th place among global economies in access to high-speed telecom networks. America’s eroding telecom position is quietly reducing our workers’ standard of living.

There is an intense global competition for capital underway. Workers in the U.S. aren’t competing with other states for jobs. Our workers and businesses are competing with China, India and Korea for the capital to build businesses. Jobs go where the businesses go. With fiber-optic connections, service jobs—from customer service in a call center to radiologists reading x-rays–can be done over fiber optic cable from anywhere in the world at the speed of light. China, India and Korea are taking steps every day to make themselves a destination resort for capital. They have made high-speed telecom a national priority. Ironically, it’s easier today to outsource work to companies in Beijing or Bangalore than to many small towns in America.

In the old game, the capital and the workers were less mobile and our stable well-developed markets and well-trained workers attracted the capital that made American workers more productive and earn bigger paychecks than any place in the world. But the game has changed.

Radical advances in technology have changed the way we all communicate and do business. Markets around the world are now connected. Capital can move easily and invisibly in search of higher returns; service jobs can move across country lines independent of immigration policy. But policy makers have continued to regulate communications as if we were still in the 1950s.

It’s time for policy makers in Washington and in state capitols around the country to wake up to the need for telecom reform. I was one of the authors of a study conducted by US Chamber of Commerce which showed a how simple but powerful reforms could add 330,000 jobs and nearly $600 billion in output.

Congress has the opportunity this year to abandon the misguided ideas that they have the ability to predict new technologies and that regulation encourages competition. By reforming telecom regulation, they will to encourage new investment, innovation, and jobs and would free businesses to do the capital spending they need to grow. This will do more to solve the problem of outsourcing than any form of protectionism.

Last July, Senator John Ensign (R-NV) introduced a highly deregulatory telecom bill that would encourage massive capital spending in the U.S. communications network. Within 48 hours, U.S. investors responded by pushing the market value of U.S. telecom equipment makers up by $22 billion. Opponents of reform say that we don’t need a new telecom law, arguing that FCC rulings are good enough. But investors will not commit capital based on the rulings of five political appointees. The duration of capital equipment is much longer than the duration of an FCC commissioner. We need a new telecom law to give investors enough visibility to risk their capital by building new networks.

Talking about change doesn’t make it happen. You have to change the rules. Congress should commit to making every law and regulation pass a simple litmus test: Will it bring capital into the U.S., or drive it out? This issue is not about Republicans or Democrats. It is about growth. It’s time for the U.S. to take a stand on growth, beginning with telecom reform.


John Rutledge

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