Telecom Deregulation Important for Progress, Experts Say
By Ryan, Jim T
STATE
Most companies would argue that less regulation and more competition are good things for business and consumers.
In some industries, like telecommunications, it’s not that simple to level the playing field.
There are divisions in the telecom world. On one side are the phone companies, large and small providers that draw their roots from the long-gone days of phone mo- nopolies. They have a lot of regula- tions to meet, but until recently, had a guaranteed rate of return.
On the other side are the cablebased services, such as Philadelphiabased Comcast Corp. and Carbon County-based Blue Ridge Communications Inc. They’re considered information companies and are not regulated.
And then there are cellular, or wireless, phone companies that do not face the same regulations as the landline companies but have seen record taxes levied against their industry.
Cutting through it all will take time, but it’s a necessity for progress, technology advocates say. For businesses that buy a lot of media services, deregulation also could lower prices, company executives say.
The cable, phone and wireless sectors are trying to gain an edge in the telecom industry as new technology becomes available and consumers demand more information faster.
The phone companies have pushed hard for state and federal deregulation for years because they see themselves at a disadvantage to the unregulated cable and wireless sectors. They don’twantto go extinct as fewer households buy landlines.
“Our position has always been that we don’t want more regulations on our competition, we just want a level playing field,” said Richard Hrip, a spokesman for Embarq Corp. The Kansas-based company is a regulated telephone company but has expanded its services as it grew and spun off from Sprint Nextel Corp., also of Kansas.
The cable industry do esn’t see the issues the same way, said Dan Tunnell, president of the Broadband Cable Association of Pennsylvania, a Harrisburg-based trade group.
Telephone companies have received relaxed regulations as a reward for agreeing to expand the reach of DSL Internet services around the state, he said. Yet many phone companies did not invest enough in new technology, he said.
“They were given a lot of money to build their networks, and if they can’t compete, I’d ask why?” Tunnell said. “They’ve been given ample opportunity to upgrade their networks.”
Legislation that Gov. Ed Rendell signed July 4 illustrates the divisions within the telecommunications industry. But it also shows how deregulation could help improve competition in the telecom market by treating competitors as equals, industry advocates said.
The Voice Over Internet Protocol Freedom Act, or state Senate Bill 1000, prohibits new regulation of phone products and services over cable wires. Those products are transmitted using the same rules that govern the Internet.
The ban on regulation was a step in the right direction, Tunnell said. It treats the phone and cable companies like equals when it comes to voice services. That’s the way regulation should be handled, he said: Like services should be treated the same.
The bill allows phone companies to continue to collect fees from other providers that use phone companies’ landlines to deliver voice services. It also protects franchise agreements cable companies have with municipalities around the state.
Larger companies like Comcast backed the law. But Embarq and small phone companies foughtitbecause originally there was no protection for the landline fees, Hrip said.
“If they’re using our network, we should get paid,” he said.
Embarq and others supp orted the bill after the fee protections were added.
Deregulation is a double-edged sword, said Allen Deckert, chief executive officer of Cumberland County-based Internet-service provider CTI Networks Inc., also known as Pa.net.
“Deregulation is good because it allows the companies to compete and offer new technologies,” he said.
“And their customers don’t have to pay extra taxes. But the downside is there’s no oversight.”
That leaves the door open for large companies to lock out smaller competition by simply refusing to do business with Internet-service providers acting as service resellers, a common retail setup in the DSL Internet market. It hasn’thappenedyet, he said, butthat doesn’t mean it’s outside the realm of possibility.
Still, it’s come time for federal and state governments to remove unnecessary regulations and taxes from the telecommunications industry, said Kelly Lewis, president and chief executive officer of the Harrisburg-based Technology Council of Central Pennsylvania.
“Each industry is walking aro und with cinder bio cks on their feet,” he said. “They’re saddled by regulations that were developed 50 and 100 years ago, but times and technology have changed.”
That’s true even in the unregulated markets, such as wireless- phone service. Lewis said that when you add up all the taxes, Pennsylvanians pay about 19 percent more on their cell-phone bills, one of the most expensive taxes in the country. That hinders the adoption of better technology and economic progress, he said.
“If we want to attract young people,” he said, “then we shouldn’thave one of the highest taxes on cell phones, which they use as a primary form of communication.”
The problem with continued regulation of the varying communication and information sectors, Tunnell said, is that government can’t keep up with the market.
“This is happening with blinding speed,” he said. “And there’s such lag that by the time politicians decide what to do, the industry and technology has evolved.”
“Our position has always been that we don’t want more regulations on our competition, we just want a level playing field.”
Richard Hrip, Embarq Corp.
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Copyright Journal Publications Inc. Sep 5, 2008
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