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Friday, December 23, 2005

OCC to Ohio Consumers: We'll Protect You From Greedy, Profiteering Firms
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Early this week, the Ohio utilities commission announced a series of seven public hearings that will take place across the state in January. On its face, the hearings are an opportunity for public comment on a staff proposal for the implementation of recent legislation, House Bill 218. At issue is the regulation of basic local telephone service

It might be better understood as a victory for the Office of the Ohio Consumers' Counsel (OCC).

The OCC petitioned for 11 hearings and there will be seven. At first glance it appears that the OCC didn't get all of what it asked and thus, it is a partial victory. Perhaps, but I think something else is going on to suggest the scoreboard might more accurately read:

Consumers – A Promise
Self-Styled Consumer Advocates – 1
Pro-Market Decisions – 0

Consumers earned a potential score when the legislature passed and the governor signed HB 218. It was a necessary change to get communications regulation on the right path, toward markets and consumer choice and away from central planning for rates and services.

Despite best efforts, I've been unable to locate the staff report at the PUCO website. So it is hard for me to say exactly how good, bad, or indifferent I am about the proposal. But a release from the OCC is illuminating, quoting in part, it reads:

The PUCO staff has proposed rules which would allow eligible companies to increase their rates for basic local service and basic Caller ID up to 20 percent each year. The price of Call Waiting and a customer’s second telephone line could increase without limit.

For sake of argument, assume that everything is the preceding paragraph is an accurate presentation of the proposed rules. It makes my head hurt.

First, wireless matters. For all those crusaders who don't see intermodal competition, look at this report from the FCC. (Hint: Scroll down to paragraph 197.) Not only does wireless matter, but all of the other alternatives to traditional voice service have an effect as well.

Second, according to the OCC, the statute creates a burden of proof for the regulated firm. The firm must demonstrate low barriers to competition in the marketplace in order to become eligible for alternative - and less burdensome - regulation. While this seems to have the burden of proof backward - in what other market do we presume government controls and make relatively free markets the exception - it is nonetheless the law. As such, the PUCO efforts are focused on creating the standards to judge barriers to competition. What type of information do we expect consumers to bring forward that can inform this question? Do consumers typically know about barriers to entry or exit in their local marketplace? Do consumers collect information on the number, type and investments of various providers? The likely answers to these questions suggest that the OCC is more interested locking low prices than they are in any number of other goods such as bundled packages, innovative offerings, high quality service and prompt repair. Since we know different consumer have different tastes for these goods, wouldn’t it make sense to release control on the prices in order to allow everyone to get what they want of the other goods?

What gives the whole game away is the OCC's opposition to relaxed price controls on vertical features and the price of second lines. A defensible case can be made for the regulation of a basic voice service based on social justice, or network externalities, or public safety or any of a host of grounds. But the OCC filings and statements bemoan that prices may rise on second lines? When did a low-cost second telephone line become a public good?

I'm skeptical that anything good will come out of the hearings. In the meantime, if anyone can email me the staff report, I'd love to take a look at it.

posted by @ 1:51 PM | State Policy

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