Legislators in Kentucky are considering a bill for modernizing Chapter 278, sections 541-544 of the Kentucky Revised Statutes relating to the jurisdiction of the Public Service Commission (Senate Bill 135).
States including Alabama, Florida, Georgia, Indiana, Illinois, North Carolina, Ohio, Tennessee and Wisconsin have all recently revamped their telecommunications statutes, and Mississippi is in the process of considering similar legislation. SB 135 would put Kentucky in a strong position relative to these nearby states in terms of creating a favorable business climate for private investment in advanced networks.
Rates for basic local exchange service would be market-based and not subject to commission jurisdiction beginning 60 months after a telephone utility elects (or has already elected) to adopt price cap regulation. The requirement to file tariffs would be eliminated at that time.
Meanwhile, an electing telephone utility would be relieved of any provider of last resort obligation where consumers have a choice between service providers, and would be free to offer voice service utilizing the most efficient technology.
The bill also provides that the provision of broadband services shall be market-based and not subject to state administrative regulation.
The PSC would retain jurisdiction in matters including 911 and billing. Among other things, it would assist in the resolution of consumer complaints and help resolve disputes between telecommunications carriers in matters involving interconnection, resale and access to unbundled network elements.
Utility regulation was necessary at one time when telephone service was furnished by monopolies. But the federal Telecommunications Act of 1996 removed legal barriers to competition, and wireless providers, cable operators and others now compete to provide voice service. Only 16% of Kentucky voice connections were served by incumbent local exchange carriers (ILECs) subject to legacy utility regulation at the end of 2010, according to the Federal Communications Commission (see tables 9 and 17).
By forcing providers to maintain single-purpose voice networks when voice can be delivered over multifunctional broadband platforms at lower cost, regulation of competitive ILEC services is actually harmful to consumers.
As it becomes increasingly costly to maintain a legacy telephone network to serve fewer and fewer subscribers due to high fixed costs, there is a danger that telephone service providers may be forced to subsidize legacy service from wireless and broadband revenues, which would be wasteful and inefficient. Forcing wireless and VoIP customers to subsidize legacy networks would penalize – and therefore diminish – investment and innovation in advanced new services.
For these reasons, the National Broadband Plan endorses a strategy for replacing the traditional circuit-switched telephone network with an IP-enabled network which includes the removal of legacy telephone regulation that could impede a smooth transition (see p. 59).
At the end of 2010, 56% of Kentucky households had a broadband connection over 200 kbps in at least one direction, and 30% had a connection at least 3 mbps downstream and 768 kbps upstream, according to the FCC (see tables 15 and 16). Nationwide, 13% of households have a broadband connection of at least 100 mbps in both directions (Table 5).
Connected Nation concluded in 2008 that a 7% increase in household broadband adoption in Kentucky led to over 30,000 jobs being created or saved. These jobs were not only in telecommunications equipment and services, but also in manufacturing and service industries (especially finance, education and health care). Thousands more jobs can be created or sustained in Kentucky as more households subscribe to broadband and upgrade the service they receive.
By enacting regulatory reform so that all providers of voice services are subject to minimum regulation which does not discriminate on the basis of technology or history (just like virtually every other competitive market), legislators can expand customer choice and ignite the broadband expansion necessary for economic growth, technological progress and ultimately lower prices.