Bill To Deregulate Many Local Phone Services Opposed

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Bill To Deregulate Many Local Phone Services Opposed  Posted: February 9, 2006
February 6, 2006

Representative Eddie Ballard, Chair
House Tourism, Development & Energy Committee
State Capitol
Frankfort, Kentucky 40601

All Members
House Tourism, Development & Energy Committee
State Capitol
Frankfort, Kentucky 40601

Dear Chairman Ballard and Committee Members:

I?m writing on behalf of KRC’s members and those low-income individuals that we represent, to express our concerns regarding HB 337. After reviewing the bill and the testimony of both proponents and opponents of the bill, KRC believes that the proposed framework in HB 337 for deregulation of most local telephone services and weakening of regulatory oversight of basic services is not in the best interest of low- and fixed-income individuals and of rural residents of many areas of the state.

As you are aware, KRC is an environmental advocacy organization that provides, without charge, legal and strategic assistance to low-income individuals, community groups, and local governments on environmental and quality-of-life issues. KRC is active on utility regulatory policy issues and energy issues as well, and has been involved in the dialogue within this state concerning utility deregulation.

Access to safe, dependable, reliable basic telephone service should be viewed not as a commodity, but as an essential service. The deregulation of essential services and elimination of the application of a number of consumer protection provisions assumes that rate and service regulation is no longer needed because there exists a competitive marketplace that will provide equivalent protections against discrimination in rates and service, yet outside of a few urban areas, there is no effective and certainly no robust competitive marketplace from either wireless or voice over internet service. “Choice” in a deregulated market choice cuts both ways and can adversely affect those who the companies and marketers “choose” not to market to – those low- and fixed-income individuals who purchase only the minimum service and have high transaction costs relative to their purchases of services. Where a handful of companies dominate the market and own or control the lines, there is legitimate concern over the exercise of market power and of whether deregulation will spur or stifle real competition.

The PSC analysis should give all of us pause to consider whether, in the absence of independent and searching inquiry of the consequences of deregulation of most local services, we should plunge ahead to deregulate at this time. The analysis raises significant questions concerning consumer protections that deserve to be answered before acting to remove the current, enforceable standard of safe, sufficient and adequate service, and the obligation to serve, and before significantly curtailing PSC jurisdiction over basic service.

KRC believes that deregulation should occur only where:

Basic service will remain universally available at affordable rates at or below what would have been the rates for comparable service in a regulated environment;

Equity will be maintained among classes of consumers in the allocation of costs; A reliable and safe system providing the same or better degree of reliability as now experienced will be maintained;

Protections against market-power abuse will exist within and among areas of the state;

Strong and enforceable consumer protection provisions remain; Assurances are provided of protection against redlining for the most vulnerable classes of consumers including elderly, fixed-income, and rural residential and commercial customers;

Fair collection and billing practices and transparency in tariffs and terms of service is provided;

Assurances and provided that past monopoly status and line ownership will not confer unfair advantage on utilities or subsidiaries in marketing other services to customers. Cross-subsidization of unregulated utility activities and preferential relations in the use and access to resources and information between affiliates is a very real concern.

KRC joins with the Office of the Attorney General, AARP and SETEL in asking that you do not recommend HB 337 for passage, and that instead, as SETEL’s President recommended, and as the General Assembly has done in the past when deregulation of other essential utility services has been proposed, you commission from LRC an objective assessment of the effects of deregulation on all classes of customers across the Commonwealth.

Thank you in advance for your consideration of these concerns.


Tom FitzGerald

By Kentucky Resources Council on 02/09/2006 5:32 PM
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