March 3, 2008
Indiana Leading Telecom Reform
In the relatively unromantic world of economic policy, telecommunications research is notable for its blandness and practicality. Yet few things matter as deeply as good public policy toward the deployment of telecommunications. Here, Indiana has a remarkable story to tell.
In the waning days of the 2006 legislative session, the Indiana legislature passed a Telecom Reform Act that quickly became the national standard for reforming access to broadband communications. It bears repeating: Indiana’s video franchising reform has become the national standard. But what is it and what does it mean for Hoosiers?
Broadband internet access is now a necessary element of business, and some type of broadband access is available virtually everywhere in Indiana (as with the rest of the nation). However, that access can be very, very costly. Even in places where existing cable TV and other cable connections to homes exist, the charge for broadband could be more than a $1,000 a year for a residential user. One major reason for the high cost is the residual monopoly power enjoyed by the dominant providers of broadband, the cable TV providers.
The 2006 Telecom Reform Act in Indiana ended the cable TV monopoly power in broadband by allowing other service providers to compete within regions for customers. This is known as video franchising.
The results of the Telecom Reform Act, according to a recent study by Ball State’s Digital Policy Institute, are remarkable. In the months following the act, broadband access in Indiana literally exploded. The state saw broadband access grow by almost 75% in a year so that by the end of 2006 the state had 1.5 million broadband connections. In the 18 months since the legislation was enacted, over $500 million in new information technology was invested in the state – just by telephone companies now able to compete with cable TV broadband providers. This led directly to 2,200 new jobs in telecommunications in Indiana, and this is just Hoosier workers installing and servicing new connections. My guess is that this spawned considerably more business in the state.
It’s difficult to tell what the effect on prices has been – pricing is a closely held industry secret. But, in the places where credible studies have been done, a 15% - 20% drop is common. And, a more subtle effect is emerging – the once sleepy local monopolists are now advertising vigorously about both price and quality of service. To a trained eye, a billboard advertising customer service is perhaps the best indicator of competition.
This happy outcome was not easy to come by. HEA 1279, Indiana’s Telecom Reform Act which brought about video franchising was vigorously opposed by the cable TV firms in the state.
It is easy in the waning days of a rancorous session to criticize our legislators. But, the very short history of Indiana’s Telecom Reform Act ought to give us pause. For in the inelegant, but important world of telecommunications policy, Indiana has emerged as a true leader.
About the Author
Educational Attainment, the 21st Century Fund and the Future of SchoolingIndiana ranks 42nd in educational attainment.
Big Savings for Ending Prevailing WageMy statistical models show that repealing state prevailing wage laws save taxpayers money.
Re-Thinking Economic Development A large share of the most mobile families—perhaps half—no longer need to live near where they work.
Money Illusion and InflationPrice fluctuation could cause inflation to last longer, but it didn’t cause the inflation, it simply extends the pain.View archives