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State and federal regulators are caught between outdated laws and up-to-date technology, two regulators told a luncheon audience at TIA's Convergence: Roadmap to Growth conference yesterday.

California Public Utilities Commissioner Susan Kennedy was the most outspoken, but FCC Commissioner Kathleen Abernathy joined her in calling for telecom laws to be rewritten so that regulation doesn't unintentionally discourage investment in--or deployment of--new technology.

"State regulators are struggling to define their role," said Kennedy, an outspoken advocate of regulatory constraint. "The law tells us there is a distinction between telecom service and information service. The law is dangerously out of step with reality."

The result, in California, has been a chilling effect on investment by two of its largest service providers, Verizon and SBC Communications, she said. Regulators stopped Verizon from upgrading switches in California last year, halting "tens of millions of dollars of investment, based on an irrelevant regulation," Kennedy said. SBC had to wait nine months for regulatory approval to offer reverse directory assistance, even though its competitors were already offering the service, she added.

"We are desperately trying to shed the exoskeleton" of outdating laws and regulations, Kennedy told a receptive audience. Twenty-five states are dealing with regulatory reform, she added.

"It's a matter of how far behind do I want my state to fall in investment and deployment of new technology?" Kennedy said.

Abernathy also cited outdated laws, left over from the break-up of the Bell System, that try to distinguish between voice services and information services, when they are converging onto IP networks.

"We don't want to unthinkingly clone old regulations onto new technologies," she said, "but we have to discover where we do draw the line."

The FCC's goal is to encourage competition and investment so that services get to consumers more quickly, Abernathy said.

"But when we are embracing the market, embracing competition, we get tagged as anti-consumer, and that's not fair," she said.

Abernathy specifically called for a new framework for Universal Service, while Kennedy cited that issue, as well as intercarrier compensation, as key issues.

"We need to wall off IP-enabled services from regulation," Kennedy said. "We need to create a safe harbor and magnet for investment."

FCC Commissioner Jonathan Adelstein also spoke on the panel, but chose to address other issues, notably the commission's effort to free up spectrum. He also said the FCC needs to look carefully on the effect that industry consolidation will have on capital investment in telecom networks.