Telecom Reform Gets New Look

Yet another call for reform, this time in the state telecommunications industry, is likely to result in a new regulatory environment in Wisconsin, but what kind of reform would benefit the state's businesses and residents?

Regulations usually are predicated on the belief that providers do not always act in the interests of their customers, but the explosion of relatively unregulated wireless phone service, the resulting decline in landline usage, and the near universal access to Voice over Internet systems has given reform advocates more ammunition to argue that competition is the best regulator.

Catching up with the times

The pro-reform argument essentially calls for a level playing field between regulated landline carriers and comparatively unregulated wireless and cable providers — not to regulate the newer technologies, but remove the straightjacket represented by rotary dial regulation. Since innovation in the market, primarily wireless phones and VoIP systems, has outpaced state statutes and the regulatory burdens that traditional telecommunications providers operate with, they say it's time to have a regulatory framework to reflect those changes.

"Cable, voice competition, and wireless competition operates under a very different regulatory scheme and is much less burdensome," said Bill Esbeck, executive director of the Wisconsin State Telecommunications

Association.

Legislation pursued in recent sessions by the WSTA essentially would reward traditional land line providers that have opened their markets to facilities-based competitors, which they were required to do under the 1996 Telecommunications Act, with the same level of regulation as those competitive providers. Esbeck believes that creating a level playing field between providers who are offering virtually identical services would encourage investment and be more responsive to the market.

In particular, Esbeck said rethinking statutes related to cross subsidization of local rates by long distance, a mechanism to fund universal service, and affiliated interest (ownership) in telecommunications utilities could allow landline providers greater flexibility in how they approach the marketplace with a package of services that consumers want. A bundled package of services that has a voice product, a broadband Internet product, and in many cases a digital television product, will allow them to be more responsive in the market and structure products and service offerings that their customers demand.

Existing regulations are "burdensome and unnecessary in this day and age," Esbeck said.

Citing telecom reform in surrounding states, the executive director of Wired Wisconsin claimed Wisconsin is now on a regulatory island and that is chasing investment to other states. Thad Nation, whose organization commissioned a recent Discovery Institute study that estimates 50,000 new jobs would be created with telecom reform in Wisconsin, also said that from the consumer standpoint, a telephone is a telephone.

"Half of Wisconsin consumers have made the decision to move to a newer [unregulated] technology, and they are so satisfied with the service that they have stayed there," he stated. "If this was, as some critics say, a case where we shouldn't do deregulation because you'll see quality degraded due to inferior customer service, why have half the customers in the state already made this change?"

Drew Petersen, director of legislative affairs and public relations for TDS Telecom, said legislation in other states is notable, but it should not serve as a catalyst for reform here. He recommends a three-part litmus test for Wisconsin telecommunications reform: more job creation in the communications space; continued investment in broadband to move Wisconsin closer to ubiquitous deployment; and greater focus by providers on the depth and breadth of their products and services, rather than regulatory compliance.

Specifically, Petersen cited the importance of reducing the time it takes for decisions to be made at the Public Service Commission, and reducing burdens that require landline companies to file compliance reports that others are not required to provide. Petersen said attempts to reform tariff filings — in which providers outline their services, rates, and terms and conditions in the various states they do business — fit within the concept of reducing regulations on landline carriers that are not applied to others. But he said changes to interstate access charges, a regulated charge that helps ensure that local rates remain affordable, will require much more thoughtful deliberation "because it only makes sense if it's in the best interests of consumers." Reform also should continue to support universal service activities, he said.

"If you bring in additional, more aggressive regulatory reforms, it is both more complex and potentially contaminates the discussion such that nothing can get done," Petersen said.

Indiana State Rep. Matt Pierce remembers the promises made about Indiana's telecom reform measure, but said lower rates, job creation, and greater investment in telecom's infrastructure really haven't materialized. "I'm probably one of the few people in the world that has a basic landline phone, so just pretty much dial tone service," he said. "The basic rate went up $3.50 the day the deregulation fully took place."

Pierce suspects that major telecom providers came out ahead because the deregulation of landline service gave them the ability to increase rates when their costs to provide that service actually were coming down. "That gave them extra capital to suck out of Indiana and redeploy in areas where they face serious competition, and where they have a lot of concentrated population," he charged. "In other words, if you're going to battle someplace, whether it's Chicago or Dallas, or some major metro area, and you have rural state like Indiana with less people per mile, you are not likely to make that investment here. So I think it just allowed more money to come out of Indiana and be redeployed elsewhere."

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