Wireless Industry Is Not Calling for Added Regulation

by Jack Stewart & Rusty Hammer (Published in the LA Business Journal)
March 21, 2005
There are some basic misconceptions about the right place and the wrong place for regulation.

Does regulation make things better? Sometimes yes. Sometimes no. What we’ve found again and again is that more regulation can build big bureaucracies for enforcement, but it doesn’t deliver a better mousetrap or magically solve problems. But regulation always comes with a price tag that brings higher costs for consumers.

We have seen regulatory efforts fail as miserably as deregulation.

Policymakers, including the California Public Utilities Commission, are still sorting out the right solutions to California’s energy woes of 2000-2001 to find a solution that works for energy producers, utilities and consumers.

Now fast forward a few years. Everyone wants better wireless service at lower prices with greater reliability. You know the funny thing? They’ve got it. Up to the mid-1990s, federal and state government heavily regulated wireless communications. Then, Congress and the FCC called for a national regulatory framework and rolled-back state regulation.

What happened? Wireless service prices have dropped by 33 percent since 1997 (by nearly 50 percent if adjusted for inflation). Price declines in California have been even more pronounced, dropping in four major cities by 42 percent since 1999, compared with the non-California average of 38 percent. Any industry would be hard-pressed to match that performance.

At the same time wireless prices were falling, wireless usage is growing exponentially, and customer bills have remained roughly in the range of $50 over the past six years.

So what about the CPUC’s efforts to re-regulate wireless? We can certainly expect higher costs, adding to California’s status as one of the top 10 states in imposing wireless fees, taxes and surcharges on customers.

In fact, the CPUC regulations won’t improve service, just drive up costs. In addition to consumers, it is California workers and companies that will pay the price. California is now a leader in the U.S. wireless communications industry, with the most wireless-related companies and the most headquarters of publicly listed wireless companies. In short, we have the most to lose of any state in dealing with regulations that are most likely to reduce investment and competition.

The CPUC should carefully consider how its regulations will work before asking all of us to take a gamble that is likely to deliver far greater harm than good.

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