^{Democracy & Technology Blog} Liberate Florida phone customers

The Miami Herald worries that phone bills will rise in Florida if legislators reduce the Public Service Commission’s authority to regulate land-line phones with “extras” like call-waiting, or caller ID (basic land-line phone service only — with no extras — would remain regulated by the PSC).

… Under current rules, phone companies are limited to annual rate hikes pegged at 1 percent above inflation for basic service.
The bills would allow rate hikes to max out at 20 percent on a single day’s notice.

In fact, the 20 percent cap has been on the books since 1995 (Fla. Stat. §364.051(5)(a)).
Florida has one of the nation’s most antiquated statutes for regulating phone services. All of Florida’s neighboring states in the Southeastern U.S. have limited traditional utility-type regulation of most telecommunications services. Indiana went even further and deregulated all telecommunications services.
Prices are not going up.
Prices are either going down, features are being added and/or service is being improved because of intense competition from voice over Internet (typically provided by cable companies) and cellphones.
Competition pushed down the rates for bundles of Internet, phone and TV service in 2008 by up to 20 percent, to as low as $80 per month, according to Consumer Reports.
Florida does not need a 20 percent cap, nor any other high-end limit. In a competitive market, providers cannot unreasonably raise rates beyond what is necessary to cover legitimate and prudently-incurred costs. If they do, they will lose sales to an efficient competitor.
We do not need regulators to tell us when the market is competitive. Cable phone service is presently available to over 100 million homes nationally and growing. Over 95 percent of the U.S. population has a choice between 3 or more providers of mobile telephone service.
One study projects incumbent telecommunications providers like AT&T and Verizon will have a 51-percent marketshare nationwide by 2012. The marketshare of the incumbent is already at or below 50 percent in some metropolitan areas.
The only purpose for retaining a price cap would be to justify some need to employ regulators.
Our recent paper, “Stimulate Broadband and Lower Utility Bills With Regulatory Reform,” notes that Florida could open up new technological opportunities and economic efficiencies that promise a direct economic stimulus of at least $7.3 billion over the next five years in the form of lower prices for voice services, plus an additional $7.5 billion in economic impact annually from increased broadband availability and use by simple reforms of outmoded laws.
Reducing the PSC’s authority to regulate land-line phones with “extras” like call-waiting, or caller ID is an obvious key step Florida can take to ignite a new spiral of innovation and revival based on new technologies and services tapping into new worldwide webs of glass and light and air.