Thursday, December 9, 2004 - The Progress & Freedom Foundation Blog

Competition Rings in the Heartland

Thanksgiving came a couple days early to select Iowa communications consumers. On November 23rd, the Iowa Utilities Board voted to end rate regulation in 20 local exchanges. Prices will be set by the market as soon as the IUB releases a written order and the relevant firms file an accounting plan.

Details: The IUB will continue to regulate service quality and reserves the right to re-regulate prices. In 19 of the exchanges, local competition was measured by at least a 50 percent, non-ILEC market-share in business and residential lines over self-provisioned facilities. In the largest exchange, Council Bluffs, the IUB found effective competition noting multiple providers of local service and that some providers utilize their own facilities.

My take: This is a positive, if incremental, move toward consumer empowerment. Close observers may see Qwest and other incumbents turn to these Iowa exchanges as new, innovative products and services are put into the field for testing. The innovation and improved choice will augment consumers' newfound ability to bargain with local providers. It is a particularly positive development because of the rural nature of the findings. I daresay that non-Iowans who don't run for President have never heard of Coon Rapids, Oxford Junction or Tiffin. Yet, competition has found each of these places.

On the downside, it is entirely undesirable to see the idea of a market-share threshold take hold in the state regulatory community. Three talented individuals serve on the IUB and are often looked to as leaders by their peers. Let's hope that other regulators note the deregulatory move, and pay less attention to the market-share test. The key to competition is not market-share but rather the ease of entry (and exit) of any provider or potential provider to the market.

posted by @ 10:49 PM | Communications