Report Calls for More Federal and Less State-Level Regulation in the USA

A new economic study released by the USA's Phoenix Center concludes that the regulatory framework for wireless communications services should have a "decidedly national bias." The study shows that because state and local regulation has effects outside of their jurisdiction, permitting certain state and local regulation could harm overall social welfare - even if state regulators adopt policies that are appropriately fitted to their own jurisdictions.

"The division of authority between Federal and state governments is a recurring theme in telecom policy, particularly with regard to the wireless industry," said Phoenix Center President and study co-author Lawrence J. Spiwak. "Because the impact of state and local actions can cross state lines and affect consumers everywhere, a cohesive single national framework for the wireless industry is the best way to go."

The bulletin notes that its model makes "no claims about whether state regulators are 'better' or 'worse' than federal regulators." Instead, the "analysis shows that even if states enact regulatory policies that are tailored to their jurisdiction, overall social welfare may be harmed if there are large 'extra-jurisdictional effects' of that action."

"The cumulative impact of widely divergent rules in 50 states has the potential to add substantial costs and drive up wireless prices for consumers generally," said George S. Ford, Chief Economist of the Phoenix Center and study co-author. "We show that because of extra-jurisdictional effects, it is possible for state regulators to do 'what is right' for their own constituents, yet at the same time significantly reduce social welfare."

"Too often public debate on this issue asks which set of regulators, federal or state, will make the better policy choices," said Thomas M. Koutsky, Phoenix Center Resident Scholar and co-author of the study. "But this debate should not simply be about regulatory competence but instead should focus upon the extra-jurisdictional impact of even well-tailored state and local policies."

The report (pdf file, 14 pages) can be downloaded for free from The Phoenix Center

Posted to the site on 16th October 2007