Phone market not ready for deregulation bill

by Hamilton E. Russell, Guest Columnist, The State

July 13, 2004

The Federal Communications Commission is drafting new regulations that will have a dramatic impact on local telecommunications competition across the country. In light of the uncertainty about those new rules, now is not the time for Gov. Mark Sanford to sign the special interest legislation that would substantially deregulate BellSouth and other incumbent local phone companies, reduce telecommunications competition and lead to higher local phone bills for businesses and households.

According to the most recent FCC figures, competitive telecommunications services providers such as my company, NuVox Communications, provide local phone service to 8 percent of the access lines in the state. This scant amount of market penetration does not justify any determination, statutory or otherwise, that the local telecommunications services market in South Carolina is “fully competitive.”

The bill passed by the General Assembly puts at risk the modest gains made by the competitive local telecommunications services providers and promises to impede the development of the competitive services market.

The bill would strip the S.C. Public Service Commission of its statutory authority over prices and terms of telephone service offered by BellSouth, Verizon and Alltel for any customers who subscribe to basic local dial tone with any other service such as call waiting, caller ID or long distance. While a consumer could complain to the PSC about a billing dispute or service, the PSC would no longer have any authority to resolve the complaint; the consumer would have to file a formal complaint with the FCC or in federal court.

This legislation would also allow smaller local phone companies to ward off regulatory oversight. According to the S.C. Small Business Chamber of Commerce, one of the bill’s many opponents, it allows these smaller incumbents to institute immediate and dramatic increases to local phone rates.

The bill also removes PSC authority to sanction BellSouth and other local phone companies for “abuse of market power” and anti-competitive practices. This leaves the door open for predatory pricing and other forms of behavior to eliminate pesky competitors such as NuVox, AT&T, MCI and ITC DeltaCom that have brought technologically advanced services to market for lower prices and forced BellSouth, Verizon and others to offer similar services at cheaper rates.

So where’s the consumer benefit in all of this? Nowhere.

Mark Twain once said that a “conspiracy is nothing but a secret agreement of a number of men for the pursuance of policies which they dare not admit in public.” This legislation benefits only BellSouth and other incumbent phone companies. While they publicly claim that this bill would promote competition and benefit consumers, facts tell another story. The real (secret) objective of these companies and their horde of lobbyists is less virtuous: The companies intend to fend off state oversight of their business practices and gain flexibility to raise rates at any time and by any amount.

Given the fact that the FCC’s old rules have been thrown out by a federal court and the agency is currently debating new rules for local telecommunications competition, and the fact that South Carolina’s level of competition in local phone service is among the lowest of the 50 states, it makes no sense for South Carolina to be the first state with this type of law.

Gov. Sanford should listen to warnings from the Small Business Chamber, the AARP and the state Consumer Affairs Department: All testified against the bill. Rather than buckle under to BellSouth, Verizon, other local incumbent phone companies and their lobbyists, Gov. Sanford must veto this bill to protect business and residential consumers and to preserve the competitive telecommunications services market in South Carolina.

Mr. Russell is vice president of legal affairs for Greenville-based NuVox Communications.


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