Wednesday, August 23, 2006

California Adopts Major Telecom Pricing Reform

The California Public Utilities Commission (PUC) voted unanimously to allow the state's four largest wireline phone companies - AT&T (formerly SBC/Pacific Bell), Verizon, SureWest, and Frontier - to price their services more like their voice market competitors.

The decision stems from the PUC's Uniform Regulatory Framework (URF) proceeding, the first major examination of California telephone regulation in 18 years. Until today, the PUC imposed many regulatory reporting requirements and conducted extensive reviews of landline telephone prices. The PUC, however, did not impose these rules on many competitors that have entered into the voice communications market in recent years. These voice competitors include cable companies, VoIP providers, and mobile and fixed wireless companies.

Although the Commission recognized that market competition sufficiently checks landline phone companies' pricing power, the Commission decision maintains current basic residential rates for phone service at current levels until Jan. 1, 2009. These rates are linked to social policy programs, which are currently under Commission review.

The PUC decision eliminates required state approvals of price changes for all other business and residential rates and services. While landline and competitive local exchange carriers will be required to provide 30-day notice to customers of any proposed price increase, a price increase will go into effect the day after it is filed with the PUC.

The PUC said its 264-page PUC decision was based on an extensive review of market conditions and related federal and state statutes. The PUC found that market competition now adequately checks landline phone companies' pricing power. The PUC also noted that California statutes encourage it: (1) to rely on open and competitive markets unless the elimination of regulation would result in rates being set above "just and reasonable" levels; and (2) to use technologically and competitively neutral measures in order to encourage the development of new technologies.

"Regulation needs to recognize there is a competitive voice communications marketplace. The changes we order today will enhance competition by allowing new services to be provided sooner and eliminating unnecessary government regulation," stated PUC President Michael R. Peevey.

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