Telecom Deregulation Bills Get Split Receptions in State Legislatures

Ia. Gov. Tom Vilsack (D) signed a bill that will make it much easier for Qwest and other large incumbent telcos to deregulate retail service rates. Iowa law for a long time has provided for rate deregulation of competitive telecom services, but the new law (HF-277) greatly eases the statutory requirements that Qwest, Iowa Telecom and Frontier Communications must meet to win deregulation. This law shifts the burden of proof to the Ia. Utilities Board (IUB) by creating a presumption that effective competition exists. In other words, the IUB will have to prove the absence of effective competition to deny a deregulation request. That will be difficult because the new law requires that the IUB consider wireless carriers, cable-based phone services and VoIP equivalent to traditional wireline telephone service in evaluating market competition.

Vilsack said new technologies are challenging current telecom structures, and the state must respond by allowing market forces to determine retail rates. He said he expects this law to reduce business rates in larger communities. He said any initial rate increases resulting from this law may ultimately produce reductions by encouraging new providers to enter the market and undercut the incumbent. The new law gives the IUB continued oversight over consumer protection and service quality for rate-deregulated services, and allows for re-regulation by the state if, after hearings, the IUB finds there’s been a market failure that’s allowed one or more providers to regain monopoly power. Qwest in Feb. won rate deregulation in Utah for all retail services other than basic exchange under a new state law (SB-108).

The opposite fate met an Ind. deregulation bill. The measure (HB-1518) to phase out retail telecom rate regulation and most regulatory telecom service oversight by 2010 died in the House when it failed to pass out of the chamber by a procedural deadline. The bill had cleared the House committee process but was never called up for floor debate, despite support from SBC and other incumbent telcos. It had faced strong opposition from competitor and consumer interests who has argued that the bill would take away state authority over telecom as the industry consolidates into a handful of carriers. Although an amendment would have provided for legislative oversight of telecom competition and investment, opponents argued that job would best be left to state regulators.

Elsewhere, a Tex. House committee advanced a bill that would deregulate basic service rates for SBC and other large Tex. incumbents. The bill (HB-789) as passed out of the House Regulated Industries Committee includes a requirement that would prohibit any local rate increases above current levels until the carriers reduced their intrastate access charges to interstate rate levels. The bill would give them until 2008 to do so. The House panel stripped from the bill a provision that would have barred local govts. from providing wireless broadband service. The bill heads to the House floor.

If it passes the House, this bill faces another obstacle in the Senate. State Sen. Troy Fraser (R), chmn of the Senate Business & Commerce Committee, said he opposes any regulatory reform bill that would give incumbent telcos the right to raise basic rates without regulatory review. Fraser’s committee must review this bill. He said that while he’s not opposed to bills that will help the incumbents cope with competitive market forces, “I am not going to give them automatic rate increases, which is what they want.” Fraser said increases to basic rates would injure residential consumers.

Meanwhile, a new Tex. deregulation bill (SB-1588) would deny the PUC jurisdiction over broadband or broadband-enabled services like VoIP. The bill would act by declaring the PUC can’t regulate any advanced services introduced to the market after Feb. 1996, which would exclude from state regulation retail broadband and IP- enabled services and most types of information services. The PUC would be able to impose reasonable regulations to provide for 911 access to users of unregulated services and would retain jurisdiction over intercarrier compensation issues related to unregulated services so it could carry out and enforce federal laws and regulations.

Ala. House action on the major telecom deregulation bill passed last week by the Senate isn’t likely until the end of March, at the earliest. The legislature is taking a week-long spring break this week and the House won’t return to session until March 29. The bill (SB-114) passed the Senate with several amendments intended to placate opponents. The bill as amended deregulates all business service rates for customers with 5 or more lines, rather than the original 3 lines. It also would deregulate bundled services -- but the Senate redefined the term to exclude situations where a customer adds vertical features to basic exchange service at the tariffed per-feature price.

The Senate amendments also would require that the price for service bundles made up of basic exchange service and optional features must be below the sum of the rates for the individual services making up the bundle. The Senate added a provision to cap rate increases for single optional features at 5% per feature. It also added a section that increases to $8,000 from $5,000 the amount an incumbent telco must pay to extend service to new customers, and must extend service to higher-cost customers if it can recover amounts over $8,000 from applicable universal service programs. The PSC has been a staunch opponent of this legislation on grounds its flash- cut to rate deregulation is likely to result in higher prices and fewer options for rural communities.