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Telephone Companies' Competitors Fight Deregulation Proposal


DECEMBER 9, 2009

Telephone Companies' Competitors Fight Deregulation Proposal

The following is from Gongwer News Service, www.gongwer-oh.com, December 9, 2009.

Wireless, long-distance and cable companies lined up in opposition to a measure designed to deregulate incumbent telephone carriers, telling senators Wednesday that the proposal would give their competitors an unfair advantage.

The Senate Energy & Public Utilities Committee also heard more opposition testimony from consumer advocacy groups that say the bill (SB 162*) would allow telephone companies to gouge low-income consumers. (See Gongwer Ohio Report, December 8, 2009)

Despite urging from an array of telecom companies to delve into competitive issues, Chairman Sen. Chris Widener (R-Springfield) remained doubtful.

"Other states that have gone through the deregulation process have found themselves more successful when they stick to the retail issues between the company and the customer," he said in an interview.

"How do you get into those access rates and the other wholesale issues without trampling on the PUCO's already existing authority, or the FCC's authority, or other interested parties?" he said. "It just hasn't worked in any other state where they've tried to include those issues."
 

The following is from Gongwer News Service, www.gongwer-oh.com, December 9, 2009.


Wireless, long-distance and cable companies lined up in opposition to a measure designed to deregulate incumbent telephone carriers, telling senators Wednesday that the proposal would give their competitors an unfair advantage.

The Senate Energy & Public Utilities Committee also heard more opposition testimony from consumer advocacy groups that say the bill (SB 162*) would allow telephone companies to gouge low-income consumers. (See Gongwer Ohio Report, December 8, 2009)

Despite urging from an array of telecom companies to delve into competitive issues, Chairman Sen. Chris Widener (R-Springfield) remained doubtful.

"Other states that have gone through the deregulation process have found themselves more successful when they stick to the retail issues between the company and the customer," he said in an interview.

"How do you get into those access rates and the other wholesale issues without trampling on the PUCO's already existing authority, or the FCC's authority, or other interested parties?" he said. "It just hasn't worked in any other state where they've tried to include those issues."

Most of the potential amendments that committee members are drafting for possible consideration address consumer protection concerns, such as the proposed elimination of Lifeline advisory boards, he said.

Jim Burt, director of regulatory policy at Sprint, targeted "carrier access" charges, which he defined as subsidies that wireless and long-distance carriers pay incumbent phone companies to connect to their customers.

"If markets are competitive, as this bill recognizes they are, then subsidies being passed between carriers, we think, are inappropriate," he said.

The access rates that incumbent local exchange carriers (ILECs) charge their competitors are far above the cost to connect their customers and ultimately increase consumers' costs, he said. "These rates, regardless of whether they're high or low, do get passed on to customers at the end of the day."

Mr. Burt borrowed proponents' argument that burdensome ILEC regulation hinders corporate spending that would otherwise help expand Ohio's communications infrastructure. "Every dollar we spend on access charges is a dollar we can't spend on expanding access into rural markets."

He asked members to add language to the bill that would require ILECs charge the same carrier access charges for in-state connections as out-of-state connections, which are generally much cheaper.

Michigan is considering legislation that would require intrastate access rates mirror interstate rates, while creating a funding mechanism to help ILECs transition without hiking customer rates, he said. While he liked the former idea, he asked lawmakers to avoid the latter.

In responding to questioning from Chairman Widener, Mr. Burt said Sprint proposed draft language that would require access charges be adjusted by a certain date "so there's some rate certainty."

Pamela Sherwood, vice president of regulatory affairs at tw telecom, also challenged proponents' assertions that the proposal would level the regulatory environment between ILECs and their competitors.

"While the bill purports to be deregulatory, its not as simple as it appears. Unfortunately, the bill does pick some winners and losers," she said, asking members to slow down deliberations on the measure to adequately address "fairness issues."

She asked senators to consider amending the bill to prevent building owners and managers from "discriminating" against certain telecommunications companies by charging them higher rates to connect with their tenants or by simply refusing entry to run cable and install equipment. The language would still allow landlords impose conditions and fees, but must apply them equally to all providers.

Chairman Widener asked whether the proposal would infringe on building owners' private property rights.

"There's no taking of private property," Ms. Sherwood said, explaining the proposed riders would ensure companies access to unused space and allow landlords to charge rent for it.

Garnet Hanly, senior counsel for T-Mobile USA, said language in the bill that grants the Public Utilities Commission of Ohio certain rights and obligations pursuant to the federal telecommunications act could unfairly burden wireless carriers.

For example, the provision would allow the PUCO to regulate wireless companies' billing and customer notices, she said, noting some other states have moved to implement such regulations. However, they increase customer costs and "would be harmful to the state of Ohio."

Ms. Hanly asked members to consider an amendment that would ensure the regulatory status quo for wireless carriers.

Chairman Widener said he was willing to consider the proposal, adding, "The bill is intended to be status quo in terms of the regulation of wireless."

Jonathon McGee, executive director of the Ohio Cable Telecommunications Association, said proponents say the proposal would modernize telecommunications regulation, but it fails to address barriers that other telecom carriers face.

"Any modernization should take into account issues facing both the incumbents and the competitive market entrants," he said, pointing to utility pole attachment rates, which are unregulated for Ohio's municipal electrics and rural electric cooperatives.

"Because companies are currently regulated differently based on their status as an incumbent or a new entrant, the types of products they deliver, and the mode of delivery, there is somewhat of a balance between the regulatory burden and associated costs," he said. "Passing legislation that address the regulatory burden of just one segment of the telecommunications industry, i.e. telephone, upsets the balance that currently exists."

Several other witnesses representing cable companies and members a coalition of groups representing consumers, seniors, and low-income Ohioans offered opposition testimony similar to comments they previously made on a companion measure pending in the House (HB 276*).

Tom Mendelsohn, executive director of the Empowerment Center of Greater Cleveland, also testified in opposition to proposed changes to the Lifeline program for low-income customers.

The measure would eliminate Lifeline advisory boards and funding that helps them market and promote the program to eligible customers, he said.

He also criticized language that would allow telephone companies to raise rates for basic local service, saying it would prove burdensome on low-income consumers.

Ellis Jacobs, senior attorney for Advocates for Basic Legal Equality, Inc., said allowing telephone companies to raise rates without first proving competition, would result in rate increases of 20%-30% for basic service over the next three years.

"The irony of telephone companies asking the legislature to let them raise rates on basic phone service while they cut back service because they face competition should not be lost on you," he said. "Competition, after all, is supposed to lower rates and improve service."