Setting the Record Straight

We wanted to take some time to do a reality check on some of the myths that have been circulating about the Telecommunications Market Competition Act (HB 1608) from groups like the CWA & AARP. The misinformation that is out there is an unfortunate attempt to scare consumers – most notably seniors – into believing this bill is bad for Pennsylvania. 

By embracing HB 1608, legislators can expand consumer choice, increase competition and promote the investments and innovation needed for economic growth and technological progress. Contrary to claims made by some special interest groups, the legislation establishes a much-needed innovation policy agenda for Pennsylvania by modernizing old telecom rules to reflect the vibrant, competitive world we live in today.

Setting the Record Straight 

MYTH:  The legislation will lead to higher phone rates.

FACT:  This claim has no basis in fact.  Public Utility Commission (PUC) oversight of basic service rates will remain in locations that lack three competitive providers.  In those locations, basic service rate changes will still require PUC approval.

Second, for the competitive areas, no PUC price oversight is needed because the market will keep prices competitive, as real world experience in other states has shown. In these competitive areas, if a carrier raised its rates indiscriminately, the consumer would have the option to choose another carrier that offers the same service at a better rate. In a competitive industry like telecommunications, consumers with options have the power to discipline the market by choosing a provider that best meets their needs at the price they are willing to pay.  Therefore, it is not logical to speculate that rates will increase unchecked. In fact, real world experience in states that have been at the forefront of regulatory reform shows that it will not happen.

According to a 2012 study by economists Jeffrey Eisenach and Kevin Caves (The Effects of Liberalizing Price Controls on Local Telephone Service:  An Empirical Analysis), “Contrary to predictions by liberalization opponents, telephone rates overall have declined significantly as a result of regulatory liberalization.  For example, the price of long-distance service fell by more than 70 percent between 1984 and 2006, and the price of local telephone service has fallen more than 30 percent in real terms since passage of the Telecommunications Act of 1996.”  This study also found that states using traditional, monopoly-style regulation have higher prices than reformed regulatory environments for basic local service, and that there is no evidence that liberalization had any impact on the “universal service” policy of ensuring every household has access to affordable communications.

MYTH: The legislation will allow telephone companies to abandon rural communities.

FACT: Every single rural telephone company in Pennsylvania supports this legislation. They have concluded that this bill provides the regulatory certainty needed to sustain their operations by promoting continued innovation and investment in the state.  The bill also provides for updated financial support measures for service to high-cost areas for these rural carriers.

HB 1608 will not harm small rural telephone companies. Rather, they are encumbered by an outdated mindset that burdens them with archaic regulatory obligations which deprive them of the flexibility necessary to take advantage of new technologies to creatively meet consumer demand. Moreover, the legislation will not leave rural consumers without service because it contains a safety-net that allows any residential consumer to petition the PUC to order the incumbent carrier to continue to provide a basic voice service if that service is not available from another provider.

MYTH: The legislation will eliminate consumer protections and quality service.

FACT: Healthy competition will keep prices in-check and ensure that phone providers continue to treat their consumers fairly – far more effectively than government control ever would.  If a consumer is unhappy with the service they are receiving, they can simply “vote with their feet” and switch providers.

Further, all of Pennsylvania’s consumer protections that apply to businesses in our state, such as unfair trade practices laws, will continue to apply to communications providers. Low income and elderly consumers will benefit from the better values that will accompany this legislation.

MYTH: The legislation will leave rural Pennsylvania and smaller cities on the wrong side of the digital divide.

FACT: With HB 1608, Pennsylvania has an opportunity to implement sound public policy that updates old rules that hamper economic growth, investment, and innovation in next generation technology.  By modernizing the state’s outdated regulatory environment, telecommunications companies will be better positioned to serve their Pennsylvania consumers – regardless of where they live – as well as the communities they serve. And remember, HB 1608 does not change Chapter 30’s broadband availability requirements, so consumers in rural and smaller cities are still guaranteed broadband availability.

The market has changed dramatically over the last 25 years. Consumers across the state, young and old, have embraced new technologies and networks to communicate. Consider the advances in wireless technology, easy-to-use video conferencing tools like Skype, and the growth of social networking.

Most residential consumers have already decided to transition from the old world of regulated telephone service. Less than 20% of the lines in Pennsylvania today are served by traditional regulated incumbent carrier service, according to Federal Communications Commission (FCC) statistics (64% are wireless and the rest are a combination of cable, other competitive carriers and incumbent carrier lines). HB 1608 simply updates the regulatory framework to better match consumer preferences and market conditions, while opening the door to the many benefits tomorrow’s innovations will bring.