A Bad Deal for Pennsylvania: Raising Phone Rates and Putting Telephone Service at Risk

Nathan Newman
Publication Date: 
November 13, 2013

What HB 1608 Will Do to Pennsylvania Consumers

A Bad Deal for PA: Raising Rates and Putting Telephone Service at Risk. What HB 1608 Will Do to PA Consumers.Media Conference Call: Listen to a conference call with telecommunications expert and report author Nathan Newman, Ph.D., or download the podcast.

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HB 1608 is a part of a wave of phone deregulation bills introduced around the country in recent years. Like similar bills in other states, HB 1608 would increase the profits of telecommunications companies while raising phone rates and putting quality telephone service at risk in Pennsylvania.

The bill is a Christmas tree of provisions benefiting telecommunications companies, particularly Verizon, without a single provision that would benefit the public. The evidence from states around the country that have passed similar phone deregulation measures shows that consumer phone rates go up and service quality goes down when regulatory oversight goes away. These deregulatory changes will not jumpstart competition, innovation, and investment, as proponents claim. Rather, this is what the bill will do:

  • Increase Rates for Telephone Service. Deregulation in other states has led to significant increases in rates. In neighboring Ohio, rates have increased $1.25 per month (the maximum rate allowed) since passage of the state’s 2010 deregulation statute. In Illinois, another state similar to Pennsylvania, AT&T increased line charge rates by up to 63 percent following passage of a 2010 deregulation. In California, some rates increased by several hundred percent. In Pennsylvania, HB 1608 would allow telecommunications providers to raise rates with only one-day advance notice in cities and towns throughout Pennsylvania. In rural areas, it would remove all regulation of rates for basic telephone service in areas served by at least two other providers, such as a cable company, wireless carrier, or Skype.
  • Abandon Rural Communities. Today, the local telephone company must serve all customers. The bill would allow carriers to eliminate service to consumers that they don’t want to serve, beginning in the year 2018.
  • Eliminate Consumer Protections and Quality of Service Requirements. The bill would eliminate critical consumer protections, reporting requirements that allow consumers to compare phone rates, auditing requirements that ensure phone company accountability, and quality of service benchmarks that require timely repair, installation, and answering of consumer calls to the telecommunications carrier.
  • Remove Public Oversight Over Telecommunications Companies’ Mergers and Acquisitions. By removing regulatory review over mergers and acquisitions, HB 1608 could cost customers and Pennsylvania taxpayers hundreds of millions, even billions of dollars, if Verizon sells off its landline business in the state. Where other states have been able to demand significant public investment as a condition of such sales, Pennsylvania regulators would lack the power to demand similar compensation for its consumers.
  • Eliminate Regulatory Tools that Have Made Pennsylvania the Most Successful State in Delivering First Generation Broadband to Rural Residents. Under the provisions of Chapter 30 mandates, incumbent telecommunications carriers must complete full statewide deployment of first generation broadband by 2015.1 According to the most recent public data, Pennsylvania telecommunications carriers have deployed first generation broadband to 93 percent of the state’s rural population. This puts Pennsylvania at the top among states with large rural populations in the proportion of rural customers that have access to broadband service.
  • Leave Rural Pennsylvania and Smaller Cities on the Wrong Side of the Digital Divide. But today, consumers and businesses need more than first generation broadband – they need high-speed. Yet, Verizon refuses to build its state-of-the-art high-speed FiOS fiber network outside of the Pittsburgh, Philadelphia, and Harrisburg metro areas. HB 1608 would eliminate the ability of regulators to encourage the deployment of next generation high-speed broadband throughout the state.

The bill ignores the reality that regulation does more than protect those dependent on landlines; it keeps telecom companies focused on long-term investments that serve the state’s economy.

Effective regulation of basic landline local phone service remains critical to protect consumers and ensure that all residential and business customers in the state have access to quality, affordable service. Millions of Pennsylvania consumers continue to rely on basic wireline service. Alternatives such as wireless are more expensive and do not provide real price competition. Moreover, wireless service does not provide back-up power and is subject to congestion and cell tower outages in times of emergency. Wireless does not provide the affordable high-speed Internet connections that people need. Students can’t do schoolwork and people can’t fill out job applications from a wireless phone Internet connection.

The proposed HB 1608 will not promote competition. Rather, like many forms of rushed deregulation, HB 1608 will raise phone rates for consumers, undermine effective consumer protections, and take away the ability of state regulators to promote long-term investments by regulated companies that would be most likely to give Pennsylvania consumers competitive options over the longer-term.

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