Washington State regulators work against traditional phone companies
Carl Gipson
is the director of the Washington Policy Center for Small Business and Entrepreneurship.
Back when there was only one way to make a phone call, and really only one company, AT&T, to do it for you, the federal government stepped in to ensure that that company did not take advantage of its monopoly position.
Regulations such as "rate-of-return" policies were implemented. Rate-of-return regulation is a system for setting prices charged by regulated monopolies – which is what the phone company was for decades. The idea behind rate-of-return is that monopolies should be required to charge the price the government thinks it would have been if the market were truly competitive. In other words, make the monopoly charge customers what they would if there were competing services available.
But times have changed. Technology has evolved. No longer do you only have one option to make a phone call. You can make a call using your landline, a cell phone or Voice Over Internet Protocol, which makes calls over your broadband Internet connection. In fact, every one of the major telephone companies has lost a tremendous amount of landline users the last few years as more people switch to using only their cell phones or a VOIP service.
The cellular telephone industry provides a good example of how to go about removing many of the archaic regulations that still govern traditional wired telephone services. According to the Cellular Industry Association, since a national regulatory framework was introduced for cellular services, subscribership has grown by more than 679 percent. They also point out that it took 16 years for cellular consumers to reach 100 million, whereas it took 90 years for landline telephone users to reach 100 million. Today there are 230 million cellular subscribers in the U.S.
The barriers facing our traditional telephone companies today mean consumers are often left out of a competitive marketplace. Regulatory reform of our state’s telecommunications rules would help bring a new interest in expanding our state’s technological infrastructure. Emerging technology means capital investment by companies into neighborhoods. It means high-wage jobs for skilled technicians. It means new products and lower prices as the supply of services increase.
Opponents of rolling back some of the old rules are afraid of the mythical curse of "deregulation." Any time an industry suffers a setback, deregulation is often blamed. But the truth is that regulation in the telecom industry is the obstruction blocking innovation and flexibility to offer customers products they want. Instead, consumers end up flocking to services and industries that are much more lightly regulated, like cellular.
In our state, the Washington Utilities and Transportation Commission governs the entry or exit of landline telephone services, the transmission of said service, as well as the distribution and pricing of communication products. But the need for the WUTC to play such a large role in the operation of private enterprise is outdated.
The time has come to modernize much of the landline telephone industry. Consumer advocates worry that rural and lower-economic neighborhoods will be left out of the loop by regulatory reform. Examining other states that modernized their regulations shows that their worries are unfounded. And, rural areas could actually expect to see more services as telephone companies could better justify building out to outlying areas.
Regulators should act as a referee, making sure the telecom players don’t step out of bounds. Currently, however, they act more like a micromanaging coach – telling the players exactly how to run their companies. Businesses should be free to make those decisions for themselves inside a relatively free marketplace. Cellular, satellite and VOIP communication companies enjoy this freedom. Wired telephone companies do not.
The bottom line is that consumers instinctively choose lower regulated service providers because they can get more bang for their buck. Looking at the proliferation of satellite television and cellular communication proves it.
