A step backward

The challenge in regulating today's telecommunications industry is to pass legislation that is forward-looking. Consolidated Telephone Company and the Minnesota Telephone Association believe a recent 129-page legislative bill proposed by the Minnesota Department of Commerce is actually a step backward. Telecommunications companies need tools to compete in the marketplace of the 21st century, not to be constrained by rules that are just reconfigured, outdated regulations that don't fit the future needs of Minnesota's consumers.

Everyone is concerned that the state not find itself divided into information "haves" (generally metro areas and larger businesses) and "have-nots" (especially rural areas) that would miss out on the benefits of new technology and e-commerce. But although there is general agreement on the overall goals, agreeing on how to fulfill them is another matter.

What are the telecom reform goals commonly agreed to? Telecommunications companies across the state believe any reform bill should include the following: Elimination of outdated rules and laws, streamlined regulation, equal treatment of all providers of the same service, regulation of telecommunications services, not telecom companies, consumer protection, setting up a fair mechanism to continue universal service, establishing a single regulatory authority.

The proposal submitted by the Department of Commerce is a distant cry from the industry's stance.

The DOC plan dramatically increases government intervention in every layer of the telecommunications industry. It creates a higher cost of operating government and a higher cost to ratepayers with no consumer benefit. Their bill reintroduces rate-of-return pricing structures that are holdovers from the monopolistic era and will stifle competition. The bill doesn't create a level playing field for municipal entry into the telecommunications field; it does not provide equal treatment for providers of similar service.

At a time when there is substantial momentum for deregulation across the country, the DOC bill sets up regulatory retrenchment not regulatory reform. It provides DOC with ability to create a revenue stream without proper opportunity for legislative input. The DOC's authority increases exponentially while there is no oversight on their activity. This bill authorizes regulatory authority over unregulated and highly competitive areas of the business such as wireless communications and the Internet. The bill grants the PUC the authority to break up telecommunications companies similar to the Federal government's attempted break-up of Microsoft. The bill creates a regulatory structure with onerous penalties and few incentives and it sets the threshold for conducting an investigation of access line complaints entirely too low.

The DOC bill dramatically increases regulations and costs to companies that are providing advanced services to their communities. The Minnesota Telephone Association's members are strongly united against this bill, according to Michael Nowick, executive secretary of our statewide trade association. "The Department of Commerce proposal creates a punitive operating environment which discourages competition and fans the flames of the 'digital divide.' The bill creates a burdensome regulatory environment where no prudent company would enter or invest in Minnesota's market," said Nowick. This bill treats similar companies with drastically different regulatory approaches and diminishes a company's opportunity to operate profitably.

This bill will drastically increase residential telephone rates in hundreds of rural communities throughout Minnesota, including Brainerd, Baxter, and all the surrounding communities in Greater Minnesota. There will be a substantial cost to our communities if this bill or any similar legislation becomes law.

The bill clearly states a goal of creating competition and defines competition petition as two or more local service providers. Yet it then fails to recognize areas that have surpassed the standard. The bill would impose artificial competition in areas where an efficient market can only support one provider. The DOC ignored the lessons from last year's telecommunications initiative and discounted any input regarding the practical effects and consequences to competition, cost and investments.

Minnesota's telecommunications providers will continue to provide quality, advanced services to their communities, we're waiting for the regulators to catch up.

(Nicolai is general manager of Consolidated Telephone Company, a telecommunication company providing local service, long distance, and Internet services in the Brainerd lakes area.)