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TMCNet: Massive telecom overhaul coming in September

[July 26, 2010]

Massive telecom overhaul coming in September

Jul 25, 2010 (The News-Herald - McClatchy-Tribune Information Services via COMTEX) -- Telecommunications regulations in Ohio haven't been significantly altered since 1989, back when fingers were used for rotary dialing instead of shifting between apps and text messages.


Given the vast industry changes and technological advances during that long lapse, legislative updates are a little past due. General Assembly members, consumer advocates, unions and public interest groups spent the past year and more debating what aspects of telecommunication should be updated and the extent of implementation.

As a result, communication between telephone users will be affected beginning Sept. 12. Depending on whom you ask, The Ohio Telecommunications Modernization Act will either rid the state of useless statutes or create two tiers of consumers who do not have equal protection from utilities. The truth will be borne out in years to come, but there is no denying its potentially sweeping impact.

"There have been some tweaks, but this is the most significant rewrite in 20 years," Ohio Telecommunications Association President Charles Moses said. "Ohio is the 27th state that's done this in the last couple of years. Some states had sunset provisions that required them to look at the law. Ours didn't, but I think the timing was good." Gov. Ted Strickland signed the bill just more than a month ago, deeming it "common sense regulatory reform. It modernizes Ohio's telecommunications laws, even removing more than 50 references to the 'telegraph' in the Ohio Revised Code." The Office of the Ohio Consumers' Counsel wasn't overly impressed with terminology elimination or several other aspects of the act. Like many others, its issues begin with the ability utilities will have to increase monthly bill prices. According the bill, incumbent local exchange carriers or landline service providers can increase rates by $1.25 per month, or $15 per year if they can prove that two other providers exist in the same area. That will hurt disadvantaged or rural customers, the OCC says, because providers only have to prove that competition before their initial price increase.

"In a lot of areas, there isn't a lot of competition," OCC spokesman Marty Berkowitz said. "Our concerns have to be with people who don't have those competitive options and live in areas where they don't stand to enjoy those options." But Moses and the 50-plus supporting organizations argue that many companies already had the capability to raise rates through the PUCO, particularly AT&T, the largest landline service provider in Ohio.

In fact, AT&T and other companies have had the option to do exactly what the Modernization Act soon will allow them to do for about four years. The PUCO in 2005 adopted an alternative regulation bill granting companies the right to raise monthly rates by $1.25 if it can detail competition in the exchange area through a PUCO filing. Such a decision affects only Basic Local Exchange Service customers, not those who have bundles or even voicemail.

At the time, the legislature said pricing flexibility would help basic providers compete with those who are not regulated by the state, like wireless and Voice Over Internet Phone services. It's no different than the argument companies and industry organizations are now making with regard to the Modernization Act.

Though the company knows the timing will appear curious to some customers, AT&T recently enacted its first monthly, basic service uptick in 25 years for a familiar amount: $1.25. Some urban and suburban customers in the state should have started receiving notices about the increase in the mail within the past two days. AT&T Ohio spokeswoman Sarah Briggs said the increase would not affect rural customers or those using the state's Lifeline Assistance program, which reduces the cost of service for low-income consumers.

Briggs stressed several times that the increase is under the 2005 law and not the Modernization Act, which has not yet taken effect. Since the company is exercising its right to increase prices now, it won't be able to do so again for another year if it wants to.

"A lot of business decisions go into deciding if and when to raise rates," Briggs said. "For the last 25 years the company did not increase rates for Basic Local Exchange Service, the core service that residential customers have. ... (AT&T) held off making the increase as long as possible." Still, Berkowitz said the petition process companies previously had to go through to raise rates will be mitigated by the new law. Either way, increases could be severe for customers who are already financially distressed.

"It's not an issue in Northeast Ohio or Central Ohio, but other areas are more affected by the bad economy," he said. "This lowers the bar. People just don't have the choices yet." Outside of rates, Berkowitz said the OCC also takes issue with what it sees as a lack of protection for consumers, mostly those who get bundles from companies regulated by the Federal Communications Commission and not the state, such as cable television providers who have entered the telephone business in recent years. The OCC believes the new legislation will make it more difficult to get credit in the event of an outage because companies will now have 72 hours to restore service, as opposed to the previous 24-hour limit.

Supporters counter that those who can afford more than basic service or live in competitive areas can simply take their business elsewhere if they are not pleased. For the BLES customers, many of the protections have not changed. Those include protections associated with billing and notices about service changes.

Also, Lifeline customers won't face increases to their service until January 2012, but the OCC and other opposers wanted a five-year freeze. Still, customers of all 42 basic providers in the state are eligible for Lifeline under the new law instead of just three.

Moses conceded the bill has some advantages for telecommunications companies, but said that is an essential element in making sure that existing companies here continue to invest in the state and possibly attracting new ones.

"Competition forever changed this business," he said, pointing out that 50 percent of landlines in Ohio have been cut since 2001, while there are now 9 million wireless subscribers in Ohio.

"Policy makers were looking at making sure there was enough consumer protection, but also (making the Act) good enough for companies to invest and innovate. In 2007, our local exchange companies invested $1 billion in the network and goods and services around us. That's just us. It's a $15 billion business a year, when you take in wireless carriers, VOIP and cable companies." Even though Strickland saw that same potential, Berkowitz said the OCC would have been more agreeable to that idea if the bill had more of a plan within it to attract more telecommunications and provide jobs.

The OCC found a few elements of the legislation it appreciated, including a pilot program paid for by phone providers that could end up giving free voicemail to low-income customers. That, however, is basically where the support stops.

"I don't think the position of this office is such that we stand in the way of progress and competition," Berkowitz said. "We are more concerned with the long-term effects on landline customers. The assumption is being made that everyone is going away from landline, but there are still quite a few who rely on landline. They should be able to enjoy the protection and safeguards that really come at no cost to the industry.

"The bill itself gave guarantees and protections to the telecommunications industry, whereas residential consumers received very little tangible benefits, especially if they have bundles." MODERNIZATION ACT: AT A GLANCE: Here are a few highlights from The Ohio Telecommunications Modernization Act that will take effect in September: --Basic telephone service providers can increase monthly rates by $1.25, if they can prove to the Public Utilities Commission of Ohio that there are two or more viable competitors in the exchange area for which the increase is sought.

--Lifeline Assistance customers will have a rate increase freeze until January 2012.

--A pilot program for free voicemail to low-income consumers will be enacted under the law. It will be paid for by phone companies in Ohio.

--Companies will have 72 hours to restore service after an interruption. Previously, service had to be restored within 24 hours.

Source: The Ohio Telecom Association, The Ohio Consumers' Counsel To see more of The News-Herald or to subscribe to the newspaper, go to http://www.news-herald.com/. Copyright (c) 2010, The News-Herald, Willoughby, Ohio Distributed by McClatchy-Tribune Information Services. For more information about the content services offered by McClatchy-Tribune Information Services (MCT), visit www.mctinfoservices.com, e-mail services@mctinfoservices.com, or call 866-280-5210 (outside the United States, call +1 312-222-4544).

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