Telecom police must walk a fine line

Telecommunications regulators in Olympia and Washington, D.C., have their plates full. In just the past few weeks, the Washington Utilities and Transportation Commission has put a hold on a Verizon Northwest Inc. request for revenue increases that could lift rates 70 percent, loosened service standards for Qwest, and claimed jurisdiction over a new company selling Internet-based telephone service. The Federal Communications Commission, meanwhile, will draft new rules governing competition in local telephone markets after a U.S. Court of Appeals said too much regulatory authority has been ceded to the states. In particular, the FCC wants to determine how Qwest, Verizon and other Baby Bells should charge competitors that want to use existing networks to provide local phone service instead of building their own. Disputes over so-called interconnection agreements have jammed court and regulatory dockets for the past eight years as hundreds of vendors — wire, wireless, Internet, what have you — fight for a piece of the $100 billion phone communications market. A frustrated AT&T responded to the FCC action by saying it will no longer sell local or long-distance service to residents of Washington and six other states, but will continue to serve existing customers, as well as business and government customers. “We foresee a future with less choice for consumers,” Chairman David Dorman said in a June 23 news release. “As AT&T loses the ability to provide them with an alternative to the Bell companies, they will have virtually no choice of telecommunications provider.” The revolution that a generation ago swept aside the AT&T monopoly on telephone services just keeps on sweeping. Will regulation go, too? “Everybody’s trying to figure out what’s happening,” says Simon ffitch, the state assistant attorney general responsible for representing consumers before the UTC. While competition and technology challenge traditional forms of regulation, he says, rate applications like that filed by Verizon show consumers still need someone to protect their pocketbooks. Also, complaints about telecom services remain — by far — the most numerous fielded by the Attorney General’s Office. “What can they in Washington, D.C., do as a practical matter with a complaint against your wireless company?” ffitch asks, naming an industry over which the UTC has no control. State regulators closer to the ground can respond more quickly to eruptions of unscrupulous activity like the “slamming” that a few years ago plagued long-distance subscribers, he says. Washington has a regulatory framework flexible enough to respond to changes in players and products, ffitch says. UTC Assistant Director Glenn Blackmon, former head of telecom oversight, says the FCC is pre-empting state regulators in the name of uniform standards, but lacks the tools to encourage competition. States compete with each other to find the appropriate balance between regulation and the free market, he says. “We certainly try to avoid regulating for the sake of regulation,” Blackmon says. “We’ve made some progress on competition.” Not enough to suit Verizon and Qwest. Richard Potter, Verizon’s head of regulatory affairs in the Northwest, says the state should dump the complicated computer modeling used to determine interconnectivity pricing and just let the market work, as he expects the FCC will. He says he is confident that whatever new regulatory system emerges will provide for mediation of consumer problems. At Qwest, Kirk Nelson says regulators are not keeping up with changes in the telecom industry. Though pleased with a UTC decision last week to ease service requirements, the president for Qwest’s Washington operations is critical of a commission staff recommendation that telecom companies be fined for not disclosing the terms of their interconnectivity agreements. Qwest and MCI just negotiated a precedent-setting pact that anticipates the new FCC rules, Nelson says. Terms will be made available to the UTC, but only on an informational basis, not for rate-setting. “We believe business-to-business interactions are preferable,” Nelson says. Where competition assures adequate consumer choice, UTC rules allowing alternative forms of regulation have allowed Qwest to price its services in response to the market. So far limited mostly to business customers, Nelson would like that flexibility extended to consumers as well. “Service is the best way to keep customers,” he says. Qwest predecessor U S West learned that lesson the hard way during the 1990s, when deteriorating service drove customers by the thousands into the arms of competitors. New forms of regulation are coming. But recent history suggests that while everyone squabbles over what those forms might be, technology and consumers will have moved on. Even AT&T, for all its bellyaching, is out there pitching its version of Internet-based voice communication as an alternative to conventional local service. The UTC has been a sturdy defender of consumers in Washington. Maybe the best it and the FCC can do now is assure all telecom customers have choices, recourse when they are wronged, and let markets take care of the rest.