Telecom Reform: Are Empty Promises Next?

They promoted it as telecommunications modernization, but can it possibly live up to promises of job creation in the tens of thousands, and unprecedented levels of new investment in services like wireless Internet and Voice over Internet Protocol [VoIP]? The Telecommunication Modernization Act of 2011 was championed by a coalition of telecommunications firms, economic development groups, and Chambers of Commerce, and signed into law by Gov. Scott Walker, but critics call it a step backward, especially for elderly and rural landline customers.

Streamline or laugh line?

Advocates generally praise the measure – which strips the Public Service Commission [PSC] of considerable regulatory power over landline phone service – as necessary to bring the state's regulatory framework in line with technological reality. Among other things, it would eliminate the PSC's authority to regulate phone rates in areas with little or no competition, a provision blasted by consumer groups, and in most cases it eliminates telecom tariffs, where providers submit prices they plan to charge for PSC review. The law also reduces the rates telephone companies charge each other for access to each other's lines.

Backers say the new regulatory framework should free up more money for investment in modern communications services. Drew Petersen, vice president of external affairs and communications for TDS Telecom, believes the new law enables carriers to utilize pricing flexibility and creates a favorable regulatory climate for carriers to devote finite capital in underserved areas like Monroe and Medford.

"It used to be that when companies looked to site a business in an area, they would ask about the schools and the tax climate," Petersen noted, "but now they also want to hear about access to technology like high-speed data and VoIP service."

Modernization advocates maintain that key consumer protections like discounted rates for low-income people, prohibitions against fraud, and access to emergency 911 are maintained, but consumer groups worry about the impact on phone rates and access to landline service.

Barry Orton, a professor of telecommunications at UW-Madison, said the big losers will be elderly residents who are unlikely to make the switch from landlines to cell phones, and rural residents who live in areas where providing cell phone service is cost prohibitive.

Orton used the word "abandonment" to describe the likely impact. "Providers could drastically reduce service quality over time by eliminating maintenance and eliminating capital deployment that might otherwise be done," Orton said, "and there is nothing people can do about it."

Orton also ridiculed claims made by reform backers like Wired Wisconsin that the law would result in the creation of 50,000 new jobs, describing it as a number that is basically pulled out of a hat. "The assumptions they make are huge, and there is no factual basis to them," Orton stated. "The study was funded by the industry that this law affects."

He believes the law's impacts will have to be addressed by a future legislature.

Cable perspective

Tom Moore, executive director of the Wisconsin Cable Communications Association, indicated that cable voice providers have a somewhat different perspective on this legislation than phone companies because of their market position, technology, and competitive status. New to the voice business in the past several years, Moore said cable companies have invested more than $2 billion in Wisconsin since the passage of the 1996 Telecommunications Act to rebuild their networks and offer digital voice, video, and data services.

These products are nearly ubiquitous in communities served by Time Warner Cable, Charter Communications, and Comcast, as cable digital voice service now serves more than 500,000 customers in Wisconsin. But it wasn't easy to get there. As cable launched voice service in Wisconsin, Moore said companies had difficulty gaining access to competitors' markets and customers. At the time, state and federal laws protected small telephone companies. "State law allowed small ILECs (incumbent local exchange carriers with less than 50,000 lines) to request a PSC finding that competition would not be harmful to the delivery of telephone service in the exchange," he noted.

In addition, Moore said interconnection agreements for small ILECs were delayed and difficult to obtain, which resulted in a slower rollout of competitive voice service in many non-urban Wisconsin telephone exchanges. While the PSC eventually issued orders that made it easier to enter small ILEC markets, he felt that laws protecting small ILECs constituted a barrier to competitive entry.

In Moore's view, the point of the telecom legislation is to modernize regulation of voice service to reflect the aggressive competition that has been taking place for several years. He applauded the new law's deregulation of VoIP service. "I expect that passage of this bill will encourage capital investments by ILECs and CLECs [competitive local exchange carriers] because the regulatory future of voice service will be more certain with the passage of this legislation," he stated. "With respect to business offerings, this legislation would help the launch of business voice service in smaller markets around Wisconsin as barriers to competitive entry will be eased."

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