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News Release
January 9, 2004
CONTACT: David Fish
(202) 289-8928

State Telecom Law Impedes Competition
Former Regulator Suggests Reforms, Study Focuses on Texas

WASHINGTON, D.C. - Decades-old laws and practices more suitable to the monopoly era are hobbling state utility commissions and slowing progress toward the national goal of greater competition. That is the central finding of a new study by a former state regulatory chief and his co-author. Focusing on Texas – but with discussion pertaining to multiple states – the study seeks to “orient state communications law toward a modest, more cabined role that aids consumer welfare.”

In “Principles for Texas Communications Law,” Progress & Freedom Foundation President Raymond L. Gifford and Regulatory Counsel Adam Peters suggest both “going-forward principles” and specific reforms. Finding that “the telecommunications market in Texas is fully competitive, or at least contestable, in many areas,” and that “consumer welfare is not maximized under the current model,” Gifford and Peters propose a set of more market-oriented principles that can be legislated under the Texas Sunset Review required by 2005. Gifford is the former chair of the Colorado Public Utility Commission.

The suggested reforms include: deregulation of retail rates, with the exception of a limited “safe harbor” basic service package; a move away from traditional cross-subsidies (such as intrastate access fees paid to incumbent phone companies) toward cost-based rates; elimination of tariffing and quality of service regulations; targeting of Universal Service and Provider of Last Resort funds to high cost areas through such market mechanisms as “reverse auctions”; and a move toward “technologically neutral” regulations that provide equal incentives for market participants.

“In the end, retail rate deregulation can facilitate further CLEC entry into residential areas and will result in dramatically lower long-distance charges, so long as access rates are adjusted accordingly,” write Gifford and Peters. “The pace of innovation will require a new regulatory regime that is technologically neutral and creates equal incentives for all players. In Texas, reaching this result will require the most dramatic alteration in the structure of its wireline rules.”

The authors urge a thorough reevaluation of multi-state communications laws, in light of new technology: “With new technology arriving on the scene, such as Voice over Internet Protocol, the regulatory response thus far has not been a forced reevaluation of existing rules, but has tended towards a reflexive query into ‘how do we regulate this thing?’”

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



The Progress & Freedom Foundation