For years, an antiquated federal rule caused a bottleneck that clogged the critical flow of capital to the information superhighway. But the feds smartened up a bit in October and lifted a regulation that contributed to the U.S. falling from first to 11th – that’s right, 11th – in the world in global telecom speed.
That regulation required the Bell regional operating companies, which had built the information superhighway infrastructures, to provide their competitors with access to those infrastructures at discounted rates. That requirement was an investment killer. The regional companies, such as BellSouth, Verizon, Ameritech and Qwest, had no incentive to build extensive broadband-carrying fiber networks if the government forced them to rent their infrastructures at minimal rates.
It’s the same old story: price controls smother innovation, expansion and capital investment. And that’s the answer to the question of why the U.S. fell so far behind smaller economies in global telecom speed.
But on occasion the world turns upside down and someone in Washington acts in a rational manner— OK, maybe “on occasion” was too generous, but the point is it does happen.
Last month it was the Federal Communications Commission, which, by a 4-1 vote, ruled that the Regional Bell Operating Companies (RBOCs) do not have to provide discounted access to new high-speed deployments. That action should solve the investment problem. Regional carrier SBC, to cite an example, said it will spend up to $6 billion to lay nearly 39,000 miles of fiber that should reach 18 million homes by 2007.
And that’s just one company. With all of the RBOCs off the sidelines and pumping in capital again, America should regain its place at the top. The strong positive impact will be felt throughout the entire economy, and may help spur another technology boom.