California’s scandal-plagued Public Utilities Commission is at it again.
Just before Thanksgiving, the agency surprised everyone by launching a comprehensive investigation into the state of competition in the increasingly obsolete analog telephone network.
The new proceeding re-opens a ten-year old decision that largely deregulated the state’s four incumbent local telephone companies. That decision seemed uncontroversial even at the time. The incumbents had long been required to make their networks available to competitors at regulated prices, leading to an explosion in new local phone companies. Today, the agency’s data base includes over 400 providers.
The transformation has only accelerated in the years the Commission has been busy elsewhere. Beyond competition in unbundled landline services, California residents have ready access to better and cheaper (and often free) voice services from well over 100 Internet-based Voice over IP (VoIP) providers including Vonage and Skype, cable and other broadband providers and, of course, mobile phone networks—nearly all of which are well outside the authority of states to regulate.
It’s no surprise to anyone, except it seems, the CPUC, that most Californians have long since deserted the aging landline network in favor of digital or mobile voice. Nationwide, according to the most recent CDC survey, less than half of all households have a landline at all, with less than 10% relying on it as their only voice service.
So why did the Commission suddenly decide that “the time seems ripe” to re-open its 2006 and 2008 rate-setting proceedings and analyze anew the state of competition in the sunsetting landline business?
Rethinking Competition in a Dying Part of the Voice Business?
The answers, which includes a deadly explosion, looming reform legislation, and the growing irrelevance of local regulators in a national and even global communications market, will take some unpacking.
But we should begin by acknowledging the ridiculousness of suggesting, as the Commission and its self-interested supporters must, that there is even a shadow of a doubt that the California voice market is far more competitive today than it was when the Commission declared it so a decade ago. Or in any case enough doubt to justify millions of dollars of poorly-scoped data collection and still-to-be-defined analysis of that data in some unspecified future.
No one with a smartphone or a home Internet connection could say so with a straight face. California, even more than in the rest of the U.S., has undergone a glorious revolution in telephone service in the last two decades, thanks almost entirely to the total victory of the Internet and new delivery technologies including fiber, cable, and cellular.
ISPs, mobile carriers, service providers and app makers large and small have since deconstructed and reanimated voice communications in unimaginable ways, using the Internet to offer cheap, reliable international calling, high-definition voice and video conferencing, cloud-based computing, virtual messaging services and uncountable integrated voice, data and text services using new networks, devices and technologies.
Most are offered at prices so low that no regulator would have had the nerve to propose them. Nor did they. Which is why consumers can thank long-standing bi-partisan agreements to keep regulators out of these and other fast-evolving new markets and not provincial state bureaucrats.
So why is the CPUC reconsidering its long-settled decisions to leave to the market to determine the best uses and competitive prices for the most moribund part of the business?
The short answer is that that is the only part of the market over which it has any authority. The rest of the communications industry is either the exclusive domain of the Federal Communications Commission, or, at least until recently, has been left largely unregulated.
If there was any doubt about either the reality or wisdom of that policy, a bill signed into law by Gov. Gerry Brown in 2012 made clear that the CPUC could not interfere with VoIP or broadband providers, an essential choice underscored as recently as June by the state’s Legislative Counsel—that is, even after the FCC’s much criticized and legally-uncertain decision to reclassify broadband and mobile voice and data services as common carriers to expand its own authority.
Even for the landline services the agency still oversees, no one expects the CPUC to change its mind; that is, to restart the engine of convoluted rate-setting and mandatory pre-approval to start and end new services that has only contributed to the obsolescence of the old network in the first place.
Despite being captioned as a “rate-setting” proceeding, the Commission has reiterated that it has no intention of getting back into the rate-setting business, at least not for consumer services.
What rates could they set, after all, that would improve the state of voice competition? Negative?
According to presiding Commissioner Carla Peterman, often a voice of reason at the sometimes-histrionic CPUC, the agency is “not intending to impose new regulations. The investigation is for data collection and analysis only.” And the scope of that analysis, Peterman emphasized, would be defined only after the data was in. “I’ll confirm we’re not doing rates and rules,” the Commissioner said last week. “I’m not prepared to say what we are going to do.”
Originally posted at Forbes, please read the full article here.