NARUC Notebook...

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The customer benefits from phone deregulation depend on who is buying what, said NARUC panel speakers. “Consumers now are better off than they were last year,” said Ark. PSC Comr. Daryl Bassett, “and they'll be better off next year than they are now.” Markets are evolving, he said, “and consumers have more choices today than ever before.” He urged avoiding “anticipatory regulation” in an era when regulators are evolving to be monitors, facilitators and policemen against market abuses. But speakers representing business users disagreed. Colleen Boothby from the Ad Hoc Telecom User Group, which represents the 20 biggest corporate telecom users, said “for us, there is no telecom competition.” She said big users buy high-capacity digital services for private networks and buy special access for off- network calls. She said 96% of office buildings have a single facilities-based provider, and the incumbent as the only special access source. She also said that since special access was deregulated by the FCC 5 years ago, incumbent telco rates of return on special access services have jumped at least 5-fold, with some incumbents enjoying triple-digit returns. She said wireless doesn’t offer the reliability and capacity big users need, and cable networks in most cities cover only residential areas. She said special access deregulation was premature: “For we as customers, regulation is good in the absence of competition.” Dan Shepheard, Time Warner Telecom vp-federal regulator affairs, agreed: “The FCC’s experiment in special access deregulation has failed. This needs to be re-regulated.” He said high special access rates “limit the scale, scope and profile of the customers we can serve.” Current FCC special access policies, he said, have given incumbents “incentive and market power to price- squeeze [enterprise market] competition.” Pete Sywenki, Sprint Nextel public policy dir., cited another example of what he called premature deregulation in the cellsite backhaul market. He said incumbent telcos enjoy a backhaul monopoly in most markets, so prices have risen, not declined. “Premature deregulation counters competition. Regulators should insist on seeing actual competition, not projected competition, before they deregulate.” Bryce Freeman of the Wyo. Office of Consumer Counsel said consumers who want only basic no-frills phone service have seen no competitive benefits because competitive providers have emphasized feature-laden service bundles. He also said many rural communities lack competitive alternatives because cable hasn’t entered rural markets and wireless coverage is spotty or nonexistent.

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Regulators need to be flexible and consider new approaches in order to fill in the current gaps in broadband coverage, said speakers at the NARUC annual meeting. John Muleta, CEO of M2Z Networks, said policy should focus on bringing broadband to individuals, not locations. He also said broadband will stimulate competitive market entry and create new kinds of businesses. He said regulators should consider creative approaches like public-private partnerships. Link Hoewing, Verizon technology policy vp, said “some areas are uneconomic for broadband right now,” but said creative policies for encouraging investment can bring in some of these areas. Dave Baker, EarthLink vp and former Ga. PSC member, said encouraging broadband buildouts is a matter of “extending to people regardless of the platform.” David Bergmann of the Ohio Office of Consumer Counsel urged use of universal service funds to extend broadband to unserved populations: “We have ubiquitous electric service because of government subsidies, so this approach could work for broadband.” Speakers said there are some things broadband policymakers should avoid. Richard Kenshulo, development dir. of Matanuska Telephone Assn., said if regulators want predictable and sustained broadband development, they should “avoid creating a climate of uncertainty.” Hoewing urged regulators to “beware of the snapshot effect and focus instead on the direction of trends. Comr. Connie Hughes of the N.J. Board of Public Utilities said regulators “shouldn’t assume that new technologies can roll out everywhere.” Bergmann said there’s a corollary: “Don’t assume that because some have competitive opportunity, all will have opportunity, or that market forces will immediately protect consumers.”

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A panel of “telecom survivors” at the NARUC annual meeting said prospects range from slim to none for major telecom legislation in the lame duck session of the outgoing 109th Congress or in the early part of the incoming Democratic-controlled 110th Congress. But telecom legislation addressing some targeted issues might have a chance, they said. Wendy Moser, Qwest public policy vp, said consumer privacy and protection against frauds like pretexting are narrow issues that Congress can cope with. Steven Pociask of the American Consumer Institute said video franchising reform has moved from being a national issue to a state one. He and Moser agreed that national franchising legislation is unlikely. “Odds are, nothing will be done,” Moser said. Cheryl Parrino, partner in the Parrino Group and a former state legislator, said: There’s nothing on the telecom platter that’s likely to rise to national attention now.” She said there may be some “telecom bits and pieces” that Congress might want to address, though. Neb. PSC Comr. Anne Boyle said universal service reform is an action possibility, but said Congress and the FCC should “step back and take a look at where the support is coming from and going to” before taking any legislative action. Lisa Zaina, exec. dir. of the Independent Telephone & Telecom Alliance, predicted “there won’t be a lot of legislative activity in the telecom sector.” Panelists said telecom will have a relatively low priority as the new Democrat majority sorts out all the issues and look forward to the 2008 presidential election. Susan Molinari, co-chmn. of the Broadband Everywhere Coalition, predicted the return of Rep. Dingell (D-Mich.) to head the House Commerce Committee will mean “lots of oversight before any significant bills emerge.”