Sanford should veto telecom bill

by Kaye Davis, Guest Columnist, Greenville News

July 12, 2004

The editorial “Cart before the horse” in the July 6 Greenville News was right on the mark in urging Gov. Mark Sanford to veto a bill that would ease state regulation of local telephone service pricing. Reports on impending changes in national telecommunications policy pile up daily in my office here in Greenville. Such reports simply add more and more reasons for the governor to veto legislation that will stymie competition and lead to higher prices for both businesses and consumers.

Opposition to the bill from AARP, the S.C. Small Business Chamber of Commerce, the South Carolina Department of Consumer Affairs and even testimony presented by the Public Service Commission should have been enough to keep the bill from being passed and sent to the governor for his consideration. Unfortunately, after the South Carolina legislative session adjourned, a decision by the Bush administration not to appeal a lower court ruling in favor of BellSouth and other Bell companies could also dramatically reduce the level of competition in local phone service and raise prices, not only in South Carolina but all over the country.

This federal court ruling could cost small and medium-sized businesses about $4.9 billion annually, according to a study jointly released June 29 by CompTel/ASCENT and NuVox Communications. In South Carolina, business would lose an estimated $60 million.

The rules that allowed much of that competition are now being rewritten, and seem likely to reduce dramatically the options for competitive entry by companies attempting to compete with the Bells. Anticipating new rules, two major competitive local phone companies decided to quit marketing local phone service in several states. Thus, the “competitive playing field” upon which this bill was based (if you believe everything its proponents said in support of the bill) has changed and will further change dramatically in the coming months.

If the governor signs this bill, South Carolina will become the first state in the country to unleash the large local phone companies that still dominate their markets. Doing this might make more sense if South Carolina led the nation in competitive entry.

However, the Federal Communications Commission’s latest semi-annual local phone competition report on my desk tells a different story. Issued June 18, it notes that as of the end of last year South Carolina posted the third-lowest level of competition in local phone service in the country. Only 8 percent is in competitive hands. Only Idaho and Montana rank lower. Even more telling, South Carolina competitive entry stayed flat from the previous report.

The General Assembly recently passed legislation giving the South Carolina Public Service Commission and the new Office of Regulatory Staff added powers to appropriately oversee and regulate utilities in South Carolina. Current state law allows the PSC to use its expertise to decide when it’s time to deregulate. This bill is special-interest legislation meant to undercut that authority, plain and simple.

Its provisions would hurt, not help, consumers.

If a customer buys anything more than basic service, PSC authority to regulate it disappears. It would end current practices that allow customers or competitors to challenge a BellSouth offering on grounds that it is anticompetitive.

Incredibly, this bill appeases BellSouth’s desire to be deregulated, but allows it to continue to be subsidized by every South Carolina telecommunications customer through the state’s Universal Service Fund – a clear case where BellSouth gets to have its cake (deregulation) and eat it (more than $24 million in subsidy annually), too.

New rules for local phone competition are in the works at the FCC. Interim rules may come soon, while permanent rules and likely new court cases may take months.

What we do know is that prices that competitors pay BellSouth to lease its lines will be going up. Higher prices and new rules seem destined to dampen competitive entry in small business and residential markets. That means less competition and more domination by incumbents.

Now is not the time to deregulate BellSouth and other incumbents. The Greenville News is correct. Gov. Sanford should allow the PSC to do its job, and veto this ill-timed deregulation bill.

Kaye Davis of Greenville is general counsel and director of human resources and regulatory affairs for Access Point Inc., a full- service telecommunications company providing service nationwide. She is a Greenville native, and she earned her undergraduate and law degrees from the University of South Carolina.

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