Incumbents Again Press Legislatures for Telecom Deregulation

A new telecom deregulation bill in Ala. would eliminate PSC jurisdiction over rates, terms or conditions of service for broadband, broadband-enabled services like VoIP, bundled services and services under customer- specific contracts. Under SB-114, the PSC also would lose jurisdiction over other advanced wireline services offered in the future by telecom carriers. It would lose jurisdiction over broadband immediately, and over new contracts and new bundled services 12 months after bill enactment. The PSC would retain jurisdiction over existing bundles for 18 months and over existing contracts until they expire. The bill comes less than a year after the PSC overhauled its price cap regulation system for incumbents, creating different schemes for large and small telcos.

As for basic services, the bill would immediately deregulate rates for all retail business services to customers having more than 2 lines. Retail basic business service for one and 2 lines, and all residential retail basic services would be capped for 3 years at the carrier’s highest prevailing rate at the time of enactment. Starting in 2008, the cap could be adjusted annually for inflation as measured by the national urban- area consumer price index. Non-basic retail services wouldn’t be rate regulated. The PSC would retain authority to require that providers obtain state authority before starting service, and would retain complaint jurisdiction in all services for disputes involving inaccurate billing, slamming, cramming, installation problems or wrongful service termination. In such cases, the PSC would be limited to interpreting applicable laws, tariffs or contract terms and any relief would be awarded only to the named plaintiffs. The bill also would prohibit the PSC from imposing any network unbundling requirements, billing requirements or consumer obligations beyond those prescribed by the FCC. The bill is in the Senate Commerce, Transportation & Utilities Committee.

An Ind. House committee plans hearings Feb. 9 to hear testimony from opponents of a bill that would deregulate all retail rates for SBC and other incumbent telcos. The House Technology, Research & Development Committee opened hearings Wed. to hear from supporters of HB-1518, which would phase out retail price caps and end telecom rate regulation altogether within 5 years. The bill also would reduce Ind. Utility Regulatory Commission oversight of service quality and would remove broadband and broadband- enabled services entirely from state jurisdiction. SBC argued that it needs deregulation to better compete against increased intermodal competition from cable, wireless and, eventually, electric utilities.

The Ind. hearings opened shortly after SBC announced plans to acquire AT&T, which would remove a major competitor from the Ind. marketplace. SBC said a favorable regulatory climate would lead to more telecom investment by SBC and other companies. Other groups, representing unionized labor and manufacturing interests, said the bill would lead to more service innovation, which would translate to new jobs and business opportunities in the state. State Rep. Michael Murphy (R), panel chmn., said the telecom industry is in transition from a fully regulated monopoly to a competitive free market: “I'd prefer to see as much competition as possible.” Opponents of deregulation Feb. 9 are expected to reiterate past arguments that the bill will encourage consolidation, not competition, leaving residents with less choice, not more. And they will likely argue that the reduced service quality oversight will leave consumers paying higher prices for worse service.

Qwest for the 2nd year in row is attempting to win Ida. rate deregulation for basic service to residential and small-business customers under 5 lines. These are the only rate-regulated telecom services; all others were deregulated by law several years ago. Under HB-69, rate- of-return regulation would be replaced with price caps, with incumbents free to move prices to any point between the cap and service cost. The Ida. bill would terminate the price caps after 3 years, unless the PUC determined it needed to retain oversight for an additional 2 years. But there would be no further extension of rate regulation past the 5-year point. The bill is pending before the House State Affairs Committee. Qwest narrowly lost a bid last year to win a similar bill.

Va. Gov. Mark Warner (D) and some Republican legislative leaders have joined to call for an overhaul of the way telecom services are taxed in the state. They urged passage of legislation (SB-1335/HB-2880) that would replace all current local telecom sales, service and franchise taxes with a single statewide 5% levy on all telecom services, including wireless and satellite TV services. Local telecom taxes now generate about $400 million annually, which is about what the proposed tax would generate. The state would collect the tax and then rebate revenue to the localities under formulas prescribed in the legislation. But the satellite industry is vehemently opposed to the legislation, saying their services were included unjustly in order to make the revenues balance out.