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March 5, 2004
CONTACT: David Fish
(202) 289-8928

Next Step In Telecom: Deregulation of Rates?
Experts Focus on Retail Price Deregulation of Residential Markets

WASHINGTON, D.C. - In time for the National Association of Regulatory Utility Commissioners in Winter Meeting on March 7-10 in Washington, The Progress & Freedom Foundation released the transcript of a recent seminar at which a diverse panel of experts, including NARUC's general counsel, debated the findings of a Foundation special report, "Trends in the Competitiveness of Telecommunications Markets: Implications for Deregulation of Retail Local Services."

Panelists included James Ramsey, general counsel of NARUC, Joseph Kraemer, director of LECG consulting, John Windhausen, Jr., president of ALTS, Blair Levin, analyst with Legg Mason Equity Research, and John Morabito, VP of legislative and regulatory affairs at Qwest. Randolph J. May, senior fellow and director of communications policy studies, moderated. May, Kraemer and Richard Levine, also a director at LECG, wrote the report.

"The report concludes that the time is ripe for a full retail price deregulation of residential markets," Kraemer said, pointing out the blueprint for state regulators in chapter 6. "The only policy issue is how, not if or when." He said there is now "effective competition throughout most of the industry and at least contestability, if not effective competition, all the way through and including the residential market.the incumbent carriers have lost pricing power."

While calling the report "well done" and "a good summary of what's going on around the country," Windhausen said it was "a little premature." He said competitors "just need more time to straighten out the provisioning process." He also posed a question: "Don't the ILECs, if you deregulate the rates, have the alternative to lower their rates as soon as a new entrant begins to enter that market, drive that new entrant out of business and then rise those rates back up again as soon as the CLEC withdraws from the market?"

Levin agreed there needs to be retail deregulation, but reached the conclusion "in a very, very different way.through a legal perspective." He said "the law set up a methodology of wholesale competition, and it just seems to me that if you have wholesale competition, you don't need retail rate deregulation.But combining retail competition is very inconsistent with the spirit of the law and seems to send crossed signals to the markets."

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