Monopolies, local obstacles cited against deregulation

Senate Bill 245, sponsored by Sen. Brandt Hershman (R-Wheatfield) is one of the most sweeping telecommunications reforms to come out of the statehouse in years, and it is already attracting criticism from citizen’s action groups that say it supports telephone and broadband monopolies and restricts local options.

The bill passed out of the Senate Homeland Security, Utilities and Public Policy Committee in an 8-2 vote last week.

“Indiana’s telecommunications laws were last updated in 1985, when a Blackberry was just a fruit and Google was just a very large number,” Hershman said when announcing the bill. “It’s time to modify our laws so that the free market can drive down prices for consumers.”

Supporters of the bill say that passage could bring as much as $7 billion in investment and 20,000 new jobs to Indiana. The elements that have drawn the most criticism are a deregulation of local phone service when broadband penetration reaches 50 percent in an area, and barriers to cities and towns providing municipal broadband service.

Dave Menzer, with the Citizen’s Action Coalition, said that more than 20 percent of the state lacks any competition for basic phone service, and that deregulation will lead to higher phone costs.

“To deregulate that basic phone service would be to expose them to an unregulated monopoly with no competition,” Menzer said. “The industry will point to cell phones, but what we’re concerned about is people who want a regular telephone in their home at regular rates. And this bill threatens that. We believe this could lead to measured local phone service. States around us that have this have experienced higher phone rates over the years. The bill expressly allows SBC, Ameritech and Verizon to raise rates a dollar a year until 2009, which may not sound like much, but after 2009 all bets are off. Isn’t the point of deregulation to bring more competition and lower rates?”

Julia Vaughn of Common Cause said her group’s primary opposition was due to the obstacles the bill creates for local municipalities who wish to provide broadband access.

“They are going to have to seek out and see if there is any private provider who wants to provide this service or is contemplating in the future providing this service. If so, it’s hands-off for the cities and towns. And before they can start the process they have to create feasibility studies and other multiple hoops. It’s as if cities and towns are going to be the provider of last resort. Sometimes they’re the provider of first choice.”

Hershman’s statement pointed to economic responsibility as a primary motivator for that section of the bill: “Using taxpayer funds to build out expensive communications infrastructure should only be considered if private sector dollars are not available. Current figures show that 50 percent of all municipally owned systems fail to break even.”

Vaughn compared broadband access to electricity and telephone service in the 1920s: essential for economic development and education.

“Communities without broadband are at a significant disadvantage across the board,” Vaughn said. “The same thing took place in the 1920s regarding access to electricity and telephones. The big monopoly providers didn’t have an interest in going out into the rural areas of the state because they didn’t think they were going to make enough money. So cities and towns stepped up to the plate.”

Vaughn said she and other critics are in discussions with senators to revise the language to address some of these concerns. The bill may go before the full Senate as early as this week.


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