Next-Gen State Regulators Outnumber Worried Ia. Commissioner in Debate

Cal. PUC Comr. Susan Kennedy said a new federal regulatory framework was needed -- the key feature being elimination of the unworkable distinction between telecom and information services and substitution of a new, technologically neutral definition of lifeline service and deregulation of other services. Ia. Utilities Board Comr. Elliott Smith agreed with the changes Kennedy advocated but also agreed with Verizon’s Tom Tauke that federal Telecom Act reform needs a “20-page bill” to avoid a prolonged rewrite. Smith said incumbent telcos should be nudged toward greater adjustment to a competitive market; he said he worries about the many Ia. carriers with fewer than 200 access lines he said were endangered by industry consolidation. “If the three of us agree to send Iowa money, will you let us rewrite the act?” Kennedy cracked. Tex. PUC Chmn. Paul Hudson agreed on the need to avoid wholesale rewrite; he, too, expressed concern for small carriers. But he said any subsidies should be targeted to them.

Fla. PSC member Charles Davidson said the most important Telecom Act principle to change is the Sec. 332 exception that lets states regulate “terms and conditions” of wireless service. He characterized it as a big loophole and a “dangerous precedent” for state regulation of cable or freestanding VoIP service. Kennedy said the most important deletion would be “network sharing, including UNE-P.” Hudson agreed. Smith, however, said Congress’s biggest mistake in the act was believing intercarrier negotiations would succeed relatively quickly.

The main element to add to the act is protection of advanced communications services from direct or indirect taxation beyond that imposed on all businesses, Davidson said. Telecom has been a great economic driver even when “overtaxed,” and would have been that much more beneficial with the excess burden removed, he said. Smith said the act should address tax and fee disparities among kinds of service provider. Hudson said the law ought to deal with the wealth transfers created by intercarrier compensation and the Universal Service Fund.

Treating broadband as part of basic service “is on the table,” said Smith, a new member of the Universal Service Joint Board. “But then you've got the question of how you fund it.” Davidson said the basic service concept didn’t apply to broadband; he questioned which competitive provider among a number could be required to provide it. He said to spread broadband he would consider subsidies out of general revenue, such as through consumer vouchers. Kennedy also emphasized making broadband universally available and the economies of scale needed for providers to accomplish that.

A rare point of agreement came on states’ consumer- protection responsibilities. Kennedy said these should include billing disputes, slamming and cramming complaints, technical issues and other matters consumers can’t take to the FCC -- especially when they involve the urgency of a service cutoff. But broad consumer enforcement should be left to the federal govt. for consistency of policy, she said. As a model, Davidson pointed to Fla.’s stance, under which broadband and VoIP policy are conceded to Washington but subject to general state consumer protection requirements. Hudson said Washington never could approach the states’ “speed to answer” the high volume of consumer inquiries. But he didn’t pick up any panel support by adding that states should serve as a “competitive backstop” on issues involving relations between carriers. Hudson and Davidson agreed that the duty to interconnect was the most important point of the Telecom Act to retain.

Govt. broadband networks also stirred less contention than other issues. Davidson said he would be amenable to Smith’s approach of letting a locality offer broadband if companies failed to step in after getting notice of govt.’s plan to act. But Davidson said govt. shouldn’t be able to take advantage of its unique fund-raising powers. Kennedy said public broadband had the benefit of prodding private service providers but also would tend to lock places into technologies that would become obsolete. She said she wouldn’t advocate it but also wouldn’t stop it.

Asked whether their commissions could use greater flexibility under state law to address new technology and competition, Kennedy complained that Cal.’s statute still defined telecom as a public utility -- an anomaly that could be remedied by a federal redefinition of regulation. Hudson said Tex. law was similar but his PUC nonetheless had “asserted a great deal of flexibility the past couple of years.” Davidson said “regulators regulate” by nature, and their staff incline more strongly that way, so if broadband or VoIP are to be unregulated that should spelled out by statute.