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CONTACT: David Fish
July 20, 2004
(202) 289-8928
Texas PUC Regulates Too Much, Expert Says
Consumer Protection and Public Safety Roles More Important

WASHINGTON D.C. - A recent report by the Texas Sunset Commission fundamentally misunderstands the state's dynamic telecommunications market and displays a bias toward monopoly-era regulation that harms consumers and competition, according to Progress & Freedom Foundation Research Fellow Kent Lassman. In recent testimony before the Sunset panel, Lassman said the Texas Public Utility Commission should focus more on consumer protection and public safety matters, and less on mandating prices, terms and conditions for communications services. Competitive forces and consumer choice best decide the latter three categories, he argued.

The report "misses the fundamental reality of competition in the Texas marketplace" by insisting on regulating telecommunications "separately and distinctly from other products in the economy." Challenging the panel's recommendations, Lassman asks "what, if any, reasons are there to continue this special legal and regulatory treatment in a multi-platform, Internet-based world?"

He offers specific recommendations: eliminate retail economic regulation of communications services, except for a 'basic service' package; reform universal service policy; and concentrate more on consumer and public safety matters. "The PUC should be scaled back, away from market regulation and focused on traditional consumer protection issues," he said. "In the place of administrative rulemaking, it can encourage the continued proliferation of privately negotiated inter-carrier contracts." He says a "fundamental flaw" of the panel's staff report is its lack of focus on Internet voice, broadband Internet access over power lines and wireless and other competition.

Lassman delivered related testimony before the Texas House Committee on Regulated Industries in late March. Both sets of comments are based, in part, on a recent study of Texas and other states' telecommunication laws by two Foundation colleagues. "Your task is to create the conditions for investment and innovation," Lassman said in the earlier House testimony. "The technologies and organization of the industry will take care of themselves. Your challenge is to legislate a set of rules that are easy to understand and adaptive as the technologies they regulate."

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