An overhaul of current telecommunications law has gotten applause from some but it will effectively shut small businesses out of the industry

Amid much fanfare, last week Senator John Ensign (R-NV) introduced what he called sweeping reform legislation to "update" the Telecommunications Act of 1996. Ensign said the rewrite was necessary in order to "remove excessive regulation" that was impeding industry growth.

"We must not allow government regulations to be an anchor on the advance of technology if we want America to lead the world in the information age," Ensign is quoted in a press statement. "This bill will create jobs, stimulate the economy, and increase consumer choice."

The announcement was greeted by a chorus of positive feedback from various sources. Wall Street seemed to like it, as telecom equipment stock soared, helping the stock market to close on a cheerful note. The libertarian-leaning Competitive Enterprise Institute hailed the bill as a "new hope for free markets" in telecommunications.

"The Ensign bill ... creates a more unified national approach for communications policy in broadband and video services that will encourage more rapid deployment of each. It also does a good job of separating basic telephone service, which is still mired in regulations that relate back to the AT&T monopoly era, from new Internet services where competition is heating up," said CEI Technology Counsel Braden Cox in a press release.

The Information Technology Industry Council (ITI), a lobbying organization composed of a self-described "elite group of the nation's top high-tech companies," also hailed the bill as a good thing for the tech industry. "Senator Ensign has long been at the forefront of high-tech policy, and this bill once again demonstrates his leadership," Rhett Dawson, ITI president, said in another press release. "We share his goals of removing barriers to innovation, promoting competition, and sparking growth in the tech and services sector."

For people who think that the telecommunications industry is or should be populated solely by large corporate conglomerates, or who have been longing to see their investments in telecom stock head north, all this is music to your ears.

If, on the other hand, you are a microbusiness owner, this bill seems likely to cause a lot of trouble in much the same way that, as the Journal reported last week, consolidation in the telecomm industry is poised to cause microbusinesses a lot of trouble.

The Journal returned to Cynthia de Lorenzi, co-founder of the Washington Bureau for ISP Advocacy (WBIA; www.wbia.us), for her take on the impact the Ensign bill is likely to have on small ISPs and their microbusiness customers. She was less than enthusiastic, to put it mildly.

"Senator's Ensign's proposed Bill is whack-a-mole legislation at best," de Lorenzi wrote in response to an email inquiry. "In trying to address a series of telecom issues that have arisen from the advancement of telecom technology Senator Ensign's Bill takes a broad swipe to address one set of problems, but ultimately creates another."

And the problems de Lorenzi predicts are pretty wide-ranging. For starters, she reminds us, not all regulations are bad. That is particularly true of regulations put into place to reign in the runaway anti-competitive behavior of the descendants of the government-sanctioned Bell monopoly. Those regulations also opened the telecommunications industry to small businesses.

She predicts that competition in local telephone markets will be wiped out within five years, and will be writhing in its death throes almost as soon as the bill is passed. The bill purportedly protects VoIP but there is nothing to stop telecom giants SBC and Verizon from bundling services to squeeze VoIP entrepreneurs out of the marketplace. And DSL providers no longer are required to share access to their networks.

And what happens to the thousands of small and microbusinesses currently offering high-speed access via those shared lines? "They're supposed to, what? Lay their own lines?" one Senate staffer asked incredulously when we spoke last week. Evidently, they are supposed to go out of businesses.

For the rest of us who prefer the lowered prices and far superior customer service we can usually find doing business with our fellow microbusiness owners, we will be left with higher prices and poor customer care with respect to Internet access, web hosting and telephone services of all kinds. And we will have very few, if any, options.

You see, when the bill's proponents talk about how this legislative proposal will improve competition, they are talking about a competitive market situation between the large cable companies and the large telecom companies. Meanwhile, they have evidently lost sight of the innovative little businesses that are the lifeblood of all the tech sectors.

"Innovation does not happen in a vacuum and most often it is spurred through micro and small business development. It is from those seeds, planted in a competitive environment, that great things grow," wrote de Lorenzi.

Or, as inventor Rob Riley told me last week, "Big companies grow stagnant when they don't have innovative small companies nipping at their heels. They don't always like it, but the competition from those little upstarts keeps them vigorous."

Not quite everyone was singing a paean of praise last week to the virtues of unfettered corporate competition minus the distraction of small firms in the industry. In a speech delivered to the New Republic's conference before Senator Ensign introduced his bill last week, Senator John Kerry (D-MA) sounded a note of caution:

"All Americans need affordable access to voice, video and Internet services. Millions of companies, large and small, need a reliable network to reach their customers. The reality today is that individuals and businesses cannot compete without access. ... We have a moral obligation to get this right."

What is interesting about this is that Senator Kerry is the Ranking Member of both the Senate Small Business Committee and the Technology Subcommittee for the Senate Commerce Committee, where initial hearings and markup will be held. It's reasonable to hope that he will keep these small business issues in mind during the process. At the very least, one hopes he will work to ensure that the voice of those small ISPs is heard throughout the process.

I would have liked to have asked someone why Senator Ensign is determined to drive small companies out of the broadband business but was unable to reach his spokesman prior to deadline. Perhaps someone better positioned to put that question to the Senator will succeed in provoking him to answer it. The explanation would no doubt prove enlightening.