Fort Wayne News Sentinel (IN.), January 16, 2006

One bill in the Indiana Senate has the potential to launch a gold rush of communications investment in the state. The trouble is, it could be derailed by its opponents, who are trying to scare Hoosiers about the effect on phone rates, or by its supporters, who would ban units of government from getting involved in providing broadband services.

Senate Bill 245 is an opportunity for Indiana to move ahead of most states in luring private investment to build the information pipelines that could become as important in the 21st century as electricity became in the 20th. It's a comprehensive, complex reorganization of the way phone service, cable television and high-speed Internet service work in Indiana.

It's tough to tackle this densely packed, 78-page bill during a short session of the General Assembly. But in the race to wire America and to catch up with European and Asian countries that are far ahead of us in providing broadband access, waiting a year on this bill would be a terrible loss.

What's at stake is whether Indiana will be a powerful competitor or a footnote in taking advantage of faster data transfers that are linking businesses and individuals around the world.

Let's look at some of its provisions.

It would deregulate phone rates in return for broadband access.

That's a good deal. It is the fastest way to induce phone companies to upgrade their lines and equipment so Hoosiers can tap into much faster Internet connections.

In Fort Wayne, people are spoiled by the easy broadband access, available through multiple sources. But most communities don't enjoy such wide availability of high-speed Internet access, let alone built-in competition among broadband providers. That's why it's worth proposing a swap of deregulated phone rates in return for building broadband access.

The law would require phone companies, no later than 18 months after raising rates for local service, to offer broadband service to at least 50 percent of the customers in a telephone exchange.

Opponents latch onto that part of the bill because for a nugget of alarmism. They warn the elderly, for example, that their rates for phone service will go up under this plan. Phone rates would increase. But the sky is not the limit on rate increases; the market is the limit. And the changing market in communications offers protections for people worried about costly phone bills.

If phone companies raise their rates too high, wireless companies are standing by to rake in customers who will switch to full-time cell service. Or dissatisfied customers could buy prepaid cell phones. And the same broadband access phone companies have to provide under the law would give customers the option of switching to voice-over-Internet systems instead of telephones.

Those are only the market alternatives for traditional phone service we see today. Five years from now, new inventions may have given land-line phone customers even more ways to work around high rates.

It would centralize cable franchising for the entire state.

Instead of flying in hundreds of attorneys to negotiate with scores of city councils and town boards across the state, under this bill, cable companies could sign one contract in Indianapolis to provide service anywhere in Indiana. This makes the state more attractive to cable companies, which means they're going to start competing in many markets. That ought to bring consumers more choices and lower prices.

In Fort Wayne, the impact is this simple: Where once there was Comcast, there would be at least Verizon and Comcast.

"A duopoly is a lot better than a monopoly," as Fort Wayne Mayor Graham Richard puts it.

Some opponents of the bill say it would rob cities of their share of the revenue from cable service. That's just plain wrong. Under the statewide plan, cable companies would have to give each governmental jurisdiction where they operate 5 percent of the revenue earned there.

Granted, millions of Hoosiers get along fine without Nickelodeon and ESPN. They couldn't care less whether they see "The Sopranos" on HBO this season or wait until next year to rent DVDs of the episodes.

But a strong majority - nationally, about 70 percent - already subscribe to cable. Each subscriber pays hundreds of dollars a year for this entertainment; improving their choices or cutting their costs is an enormous benefit to them.

What's most important isn't which company brings The Learning Channel to your home. It's the fact that cable companies would compete for customers, and that's a powerful motivation for every company to hustle hard upgrading equipment and services. This bill in the legislature brings the day closer when companies in Indiana compete to win the trifecta, customer by customer: supplying customers with television programming, Internet access and phone service, all through the same high-capacity connection. It's a bonanza for the companies, an advantage for customers and a way to wire more Hoosiers more quickly into the high-speed data grid that will undergird the economy of the 21st century.

Property-tax abatements for communications equipment would become automatic throughout the state.

Sure, some companies would install some upgrades without property-tax abatements. But those tax breaks have two things going for them: First, they last only five years. Second, making tax abatements an automatic incentive for hardware investment anywhere in the state makes Indiana a more attractive site for investment.

Cities and other local governments would be effectively banned from developing broadband systems.

This is the biggest problem in the bill. If private investors, such as a phone company, don't install broadband in a town or city, the state shouldn't block such a community from establishing its own service.

Technically, cities and towns would still be able to develop such systems. But restrictions are so tight as to amount to a ban. The bill would prohibit a local government from compelling nonsubscribers to help pay for a broadband system. If the city or county issued bonds to pay for developing broadband service, it could use only the revenues from broadband service to repay the bonds.

This is appallingly shortsighted. Broadband is infrastructure for future economic development to benefit an entire community. Expecting a broadband service to pay its own way in the early stages is like building a new street and expecting only commuters whose offices lie along it to pay its cost.

The bill's sponsor, state Sen. Brandt Hershman, R-Wheatfield, said the bill protects taxpayers from being saddled with long-term debt for quickly obsolete technology. But if any city decides that it's worth that risk to meet a local need, it should be able to. This isn't a far-fetched possibility. Auburn, for example, provided broadband service to help retain local businesses.

Of course it's better for a city to have private dollars provide broadband access. But if a city earnestly solicits such investment, and no company offers to build, that city ought to be free to develop its own system.

The obvious advantage to allowing governments to develop broadband systems is that it offers another route to access for more Hoosiers. There are subtler advantages to not barring local governments from the action. An example: Knowing that governments could build broadband access might spur more companies to invest in small communities early on, before impatient residents moved to build a public system.

Should the legislature pass this bill?

Making it nearly impossible for units of government to offer broadband service is a big mistake. It's such a serious mistake that it might block passage of this bill. The smartest strategy is softening these provisions to give local government some flexibility in bringing broadband to Hoosiers.

But the rest of the bill is so important and promises so much opportunity for Indiana businesses and residents that it would be better to pass it, even with the restrictions on municipal broadband. Fight the battle over municipal broadband in 2007 if needed.

Spreading broadband across the state is not limited by a lack of technical know-how or insufficient markets for the service or a shortage of capital to build these systems. It's limited by outmoded regulation. Changing those regulations to fit a changing world is the most important step the General Assembly can take this year to improve Indiana's economic competitiveness.

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