Monday, December 22, 2003 - The Progress & Freedom Foundation Blog

Phone Politics

Well, I can't resist wading in ankle-deep to the interesting exchange on local phone rate deregulation between Ray ("Been there, done that") Gifford and John ("Keep That Umbrella Up") Windhausen. See below for their respective posts.

In this instance, I think Ray is being appropriately polite to my good friend John when Ray resonds to John's message with a "Fair enough." (I say "appropriately" polite because John is a good friend, good advocate for his cause, and a frequent participant at PFF programs.) But read John's message and you will see that he is arguing that setting local phone rates is all "political" and about "political decisions."

It is true, of course, as John asserts, that, historically, setting rates has involved a good dose of socio-politics. So, no doubt that in most (but not all) states the local rate structure in place today, with subsidized residential rates, has been influenced (heavily) by social policies driven by politics. But in an era of rapidly increasing competition, most people realize that we need to move more quickly to implement ratemaking methodologies based on sound economics--not politics. CLECs possibly might have been encouraged, as John says, "to develop a business plan, raise capital, and build networks because of a political decision to set business prices at X and residential prices at Y." Encouraged by whom? But I'm pretty sure CLECs were never promised by anyone with authority to do so that rates would not be rebalanced to make them more economically rational.

It seems to me that the (still unfulfilled) promise of the Telecom Act of 1996 was that, in order to have consumers benefit from new competiton, we were going to move decidedly in the direction of ratemaking policies based much more on sound economics than sound-off politics. Now, seven years after the Telecom Act was enacted, it's difficult to work up to much sympathy for John's worry about a potential "flash-cut rate change."

If we want phone rates in a competitive era to remain political decisions, then why not just leave the rate-setting to the legislatures? That's where the political expertise lies. No need to waste the time of the supposedly expert telecom regulatory authorities.

posted by Randolph May @ 6:08 PM | General