PUC Accused Of Not Regulating Enough

SEPT. 13, 2010

By KATY GRIMES

The Public Utility Commission pledged to keep a watchful eye on the outcomes of telecommunication deregulation in the state, but has failed to do so, according to a recent, blistering report from the Senate, thus opening up renewed debate over telecommunications deregulation and whether the deregulated system has adequately sparked market competition.

Has anything improved since the 74-page report was released in July? “No. “Not yet,” said Dorothy Korber, author of the report released by the Senate Office of Oversight and Outcomes.

Korber’s report stated that AT&T and Verizon, the state’s two dominant telecommunications companies, control 65 percent of all of the telephone services in the state and more than 85 percent of the land lines. Korber said that it astounded her that people have to pay in order to have an unlisted phone number. However, Korber expects something to happen fairly soon, as three of the five PUC commissioners’ appointments are coming to an end, and it’s the Senate that confirms them. “It’s a way to hold their feet to the fire,” said Korber, and “find out their attitudes on issues.”

While some supporters of 1996 deregulation argue that it has improved competition, others say that telecom deregulation just restructured the regulatory system, and did not really open the system up to competition. “People think deregulation means free market – nothing could be further from the truth,” said Wade Teasdale, a policy consultant with the Senate. “We didn’t regulate –  just restructured.”

Surprisingly, several Capitol conservatives did not want their names used after complaining that telecommunications companies can and do raise prices without notifying the PUC. They said that since the public utility commission even exists, they want the PUC to do its job. “Verizon and AT&T don’t even have to send a phony letter to the PUC,” said Korber. “What we really need, is more players and real competition in the telecom industry,” said Teasdale, “in order for the free market to really work.”

By contrast, the PUC has recently declared that telecommunications in California are already “robustly competitive,” therefore regulatory control is unnecessary, causing some critics to ask why the PUC is even necessary.

Korber found that the regulatory commission has ironically been using a free-market argument and is not working to guarantee “just and reasonable rates” as promised, for consumers through competition. “Deregulated telephone rates are not scrutinized and virtually any increase is automatically considered just and reasonable,” the report states.

On Jan. 1, 2011, price caps will come off the basic residential phone rate and the subsidized Lifeline rate. The report found that consumer advocates fear what will happen when the cap is lifted. According to TURN, a liberal-leaning utility reform consumer advocate, phone rates have gone up by as much as 600 percent in the last three years and the CPUC wants to let phone companies have unlimited rate increases.

The PUC has even proposed changing the definition of basic telephone service by ending unlimited calling, requiring telephone service subscribers to pay for every call they make or receive, including incoming calls, calls to “toll free” 800 numbers and unwanted calls from telemarketers, according to TURN. PUC officials appear not to be preparing to do anything, other than to “monitor what happens to the basic rate,” according to the report, which would support the free market model.

The Consumer Affairs Branch of the PUC handles complaints about all utilities, of which two-thirds of the complaints are telephone issues, received $12.7 million in additional funds during the 2006-07 to add call center hours, add 19 consumer representatives, including 13 bilingual representatives, and an additional five hours each day to the consumer call center. Korber’s report found that they came up short — call center hours were increased by one hour, and only a few new representatives were hired.

The PUC has argued that since deregulation, it’s the competition between telecommunications companies that “regulates,” which has ironically put the government regulators in the position of arguing for less government control.

But Korber recommends that state legislators renew a law that expired in 2004, which required the PUC to submit an annual report to the Legislature on the status of competition, significant changes in the telecommunications marketplace, and recommendations of statutory changes. If the law is reinstated, public reports could also be required to track rate changes by each carrier.

“Fortunately,” said Korber, “the Legislature can weigh in on certain issues with the PUC. The buck does stop with legislators.”