Pennsylvania Telecom Reform Necessary to Level ILEC Playing Field, Verizon Says

The local exchange carriers are still “being subjected to an archaic regulatory framework” that’s partly rooted in “law that dates back almost a century,” said Frank Buzydlowski, Verizon Pennsylvania director-state government relations, in his testimony. The regulated providers do not have to comply with filing and reporting requirements to the PUC, and they are not subject to PUC supervision, said Buzydlowski. “Outdated overregulation discourages investment in our state, limits customer choice, stifles innovation and increases costs,” he said. The “monopoly era” of the landline telephone is in the past, and the laws written for a “bygone era no longer serves the public interest,” said Paul Vasington, Verizon director-state public policy. At the end of 2012, more than 38 percent of U.S. households were wireless only, and an additional 16 percent of households consider a cellphone to be their primary line, said Vasington. The FCC reported in 2012 that Pennsylvania CLECs and VoIP providers served 42 percent of landlines. The state’s ILECs serve only 21 percent the state’s lines combined, said Vasington.

The “sky-is-falling” opposition that portrays HB 1608 as a bill that does away with all regulation and cuts the PUC out of any role in telecom is “plain wrong,” said Carl Erhart, Verizon regional director-state government affairs. HB 1608 does not eliminate the PUC review of telecom mergers or eliminate oversight of rates, service quality and complaints in areas “where customers have fewer competitive options,” said Erhart. The incumbent telephone companies must offer basic voice service to their customers in competitive areas until 2018 “no matter how many competitive alternatives are available,” said Erhart. “At any time, even after 2018, a residential customer may petition the PUC to require the incumbent telephone company to provide voice service if service is not available from any other provider,” said Erhart.

PUC Chairman Robert Powelson and Commissioner James Cawley disagreed in their testimonies on whether the bill would be good for customers and providers in the state. The dual regulatory regime created by HB 1608 would “level the playing field” for local exchange carriers by allowing them to “compete with fewer regulatory burdens’ in geographic areas where customers “already have an array of choices,” said Powelson. “The PUC believes that increased competition in the telecommunications market will benefit customers by potentially keeping prices low and spurring innovation, as evidenced by the numerous product offerings and consumer savings present in Pennsylvania’s competitive electricity market,” he said. Cawley recommended that the committee table the bill, and order the PUC to do a in-depth study of the state of telecom competition in Pennsylvania rather than “enacting this bill without objective data to make a public interest policy choice.” The true level of competition in the state is “unknown to all but the competitors themselves,” and therefore it is “impossible to intelligently or responsibility accept the carrier’s arguments that robust competitive forces compel a level playing field unencumbered with consumer protections and regulatory oversight,” said Cawley.

The USF would also be capped at 2012 relief levels, which “effectively terminates” the fund at the end of 2018, said Cawley, state chairman of the Federal-State Joint Board for Universal Service. The disputed FCC order to transform the FCC USF, argued in the 10th U.S. Circuit Court of Appeals Tuesday (CD Nov 20 p2), will “adversely affect the financial viability and operational survival of numerous rural ILECs” in Pennsylvania and across the U.S., said Cawley. “Because of the FCC’s ill-advised actions, the Pennsylvania USF assumes critical importance for maintenance and enhancement of universally available wireline voice and broadband access services in rural Pennsylvania for residential and business customers,” said Cawley. The PUC should be permitted to restructure and the state USF with input from interested stakeholders, he said.

The HB 1608 regulatory changes would permit ILECs to compete with all other providers on the same basis for five years prior to 2019 while the state USF continues “unabated,” said Dan Tunnell, Broadband Cable Association of Pennsylvania president, in his testimony. The current USF program draws more than $32 million from competitors, including cable companies, and distributes the money to all ILECs with the exception of Verizon, said Tunnell. If the bill passes, ILECs will be “free to move in and out of our marketplace and we will continue to subsidize them,” said Tunnell. “Aside from this being patently discriminatory, this scheme does not differentiate between the small rural carriers and their national counterparts.”

This bill could lead to higher rates and reduced service quality for telephone service for Pennsylvania residents, said Tanya McCloskey, the state’s acting consumer advocate, in her testimony. Under HB 1608, the PUC “might have no authority to consider the ramifications of the abandonment of the wireline network since the Commission would lose authority over the abandonment of such services immediately in non-rural areas and by 2016 in rural areas when service in those areas could be deemed competitive,” said McCloskey. Eliminating COLR obligations could harm customers who need telephone services the most, said Elizabeth Marx, staff attorney at the Pennsylvania Coalition Against Domestic Violence. Telephone services enable victims of abuse to access emergency assistance, secure employment and childcare and connect with support networks, said Marx. “Individuals in these limited or fixed income circumstances cannot always afford more than a basic, telephone-only telecommunications service,” said Marx.

Nothing in the bill is good for Pennsylvania consumers, workers, businesses or communities, said Edward Mooney, Communications Workers of America vice president. CWA represents more than 18,500 employees in the state, said Mooney. “The provisions of HB 1608 will lead to higher telephone rates, lower service quality, eliminate critical consumer protections, allow telecommunications companies to abandon rural communities, and leave millions of Pennsylvania families and small businesses on the wrong side of the digital divide,” said Mooney.

Sprint, T-Mobile and TechAmerica all submitted written testimony for the record on HB 1608 at the hearing in addition to several chambers of commerce in the state, said Rep. Robert Godshall, Consumer Affair Committee Chairman. The committee is scheduled to have a second hearing on HB 1608 on Dec. 12. (sfriedman@warren-news.com)