Old regulations inhibit new technologies

Everywhere you look, the digital age continues to disrupt long-standing business models and to challenge our expectations of what is possible. The PC and the Internet have been powerful engines for economic growth, personal expression and disruptive change. The ability to put all of that technology in people’s pockets — or in their glasses or in their cars’ dashboards — promises to have just as significant an impact on our world.

The combination of mobility and increasingly powerful computing is empowering individuals — as consumers, as entrepreneurs and as citizens — more than ever before. This suits our country well because our heritage is rooted in individualism and a pioneer spirit, which may explain why no country in the world takes better advantage of these technologies or creates more of them. Expanding our horizons, be they geographic or technological, often brings anxiety and discomfort. But greater prosperity has always followed such transitions because as we Americans adapt, we thrive.

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The technology and telecommunications industries have created millions of jobs and increasingly drive our economy. These sectors are also leading the way when it comes to investing in America, with nine companies among the top 25 firms in domestic capital expenditures. Broadband providers alone have invested more than a trillion dollars to build our country’s Internet infrastructure, which has become one of our nation’s key innovation platforms.

The digital revolution, however, runs far deeper than large companies with household names. According to a McKinsey & Co. study, small- and medium-size businesses across the country see 2.6 new jobs created by the Internet for each one lost to technology-related efficiencies. The new application economy that has sprung up around the smartphone already employs about half a million Americans. Many of these jobs are at small businesses spread across the country, and amazingly none of them existed before 2007.

For all the innovation in the marketplace, however, where is the accompanying innovation in regulatory policies? Today’s regulatory structures, mostly established by laws written two decades ago, were built for business models that are largely outdated. When Congress wrote the Telecommunications Act of 1996, there wasn’t much talk about the Internet — indeed, even my former colleague Sen. John Kerry has said that “within 6 months of writing that act, it was obsolete because all our conversation was about telephony.”

While companies have, for the most part, been able to innovate around these outdated regulations, it is becoming increasingly difficult to do so. For example, Google built a gigabit-capable fiber network in Kansas City, Kan., yet it chose not to offer phone service over its world-class infrastructure.

According to Google, the added cost of delivering telephone services is almost nothing, but the company is stymied by a myriad of outdated telephone regulations. In other words, government policies intended to protect telephone customers have harmed them by stopping a deep-pocketed, innovative company from entering the telephone marketplace and competing with incumbent providers.

What may have been appropriate in the era of Ma Bell and before the Internet simply does not make sense anymore. As technology and our economy evolve, our notions of the government’s role in commerce need to evolve as well. We must find ways to encourage new technologies and enterprises to keep incumbents on their toes, rather than have the government micromanage competition in the communications space like we have in the past. The silos separating industries have been replaced by cross-industry competition, like Apple disrupting the wireless marketplace or Google taking on the broadband incumbents.

To ensure that the digital revolution will realize its maximum potential, Congress should modernize our telecommunication regulations to reflect today’s more vibrant and competitive landscape while still protecting against abuses in the marketplace. We can start by reviewing our video laws, which are more than 20 years old. The IP transition may be another area where market realities, instead of outdated assumptions, can help guide us toward a more nimble and flexible policy regime. Also, it should go without saying that we ought to avoid applying old monopoly-era rules to the Internet.

Beyond reforming our regulatory framework, we need to pursue broader pro-growth policies that will foster innovation and investment in the digital economy. Mobility is driving the innovation economy, so we must work quickly to make more spectrum available for commercial use, both licensed and unlicensed. Congress should also simplify the tax code and reduce the corporate tax rate to make it easier for companies to raise capital and to invest their resources here in America. Policies like these would spur job creation and unleash a wave of economic growth.

Tom Wheeler, the president’s nominee to chair the Federal Communications Commission, has said that we are in the midst of a transformational network revolution thanks to the marriage of Moore’s Law and unprecedented mobile connectivity. In this revolution, new players will rise while old titans either adapt or are swept away. To keep the United States atop that disruptive wave, we must ensure that outmoded regulations and unnecessary government interference do not drag us under or inhibit choices for consumers.

Thune represented South Dakota in the House of Representatives from 1997 to 2003, and has been U.S. Senator from that state since 2005.  He is ranking member on the Commerce, Science and Transportation Committee.