Statement
of Commissioner Jason Marks on Proposed Qwest "Competition"
Legislation
At its Formal Opening Meeting of
February 1, 2005, the PRC voted to take a neutral position on Qwest's proposed
"competition" or deregulation bill (this bill has not yet been
introduced and does not have a number). I joined three other Commissioners in
voting to neither support or oppose the bill in its current form (one
Commissioner abstained from voting).
Last fall, Qwest presented a
bill to an interim legislative committee that would have effectively
deregulated Qwest's retail operations in New Mexico. If that bill had become
law, Qwest would have had the ability to raise any of its prices for residential
or business services, upon giving ten days notice to the PRC. It was my
position that this bill overstated the competitiveness of the market, and would
have given Qwest the ability to use its monopoly power to extract more revenue
from captive customers, in order to subsidize its offerings in segments where
it faced competition. For these reasons, I strongly opposed the bill.
In early January, Qwest came to
the PRC with a revised proposal that would protected the rate for basic
residential phone service (keeping it a regulated amount), but deregulating
everything else, including residential add-ons (voice mail, caller ID, etc.)
and all basic and extended business services. I opposed this version as well,
because of the likelihood that it would result in increased prices to business
and residential customers in segments that were not fully competitive. New
Mexico has one of the lowest rates of competitive local exchange carrier (CLEC)
penetration in the nation – 8%. In an environment with limited residential
wireline competition, this bill would have given Qwest a license to capture
most of the difference between today's current regulated rates for customers
taking basic services plus a few options (around $25 - $30 per month), and the
prices charged by wireless and VOIP providers, which start at $40 - $50 per
month. At one point, Qwest also offered an alternative that would have
protected the basic business line rate, but this still failed to satisfy my
criteria that the consumer interest not be harmed.
In the face of continued
opposition from myself and others at the PRC, Qwest drafted a totally new
proposal, which was the proposal voted on at the PRC's February 1, 2005
meeting. This proposed bill lets the PRC keep total regulatory power over the
rates for basic residential and business lines, and over any increases for
extended or add-on services. The PRC also continues to have the power to
establish and hold Qwest to quality of service standards. The only
"deregulation" Qwest gets is the ability to lower its rates for any
of its extended services as it sees fit, but not to below cost, on three days
notice.
Under the current statutes and
the Alternate Form of Regulation (AFOR) agreement, Qwest already has the
ability to lower its rates on ten days notice. What they can't do under the
AFOR is discriminate geographically in their pricing – if they want to lower a
price for a service in Albuquerque, they have to lower the price for that same
service for all of their customers around the state. They would be released
from this restriction under their bill. Their bill may also give them a bit
more flexibility than they have now to offer lower prices to selected classes
of customers, for example, customers they are trying to "win back."
Having considered the matter
carefully, I have concluded that if this bill was to pass the legislature and
become law, no New Mexico business or residential consumer would be at risk of
paying higher rates to Qwest than under the current statutes and the AFOR.
There is a risk that by giving Qwest more flexibility to respond to emerging
competitors, the evolution of competitive markets could be suppressed, to
consumers' detriment in the long-term. However, I believe that there are more
effective strategies for fostering telecom competition than the current
artificial restrictions on Qwest's retail flexibility. I intend to pursue those
options, which may include lowering wholesale rates charged by Qwest to its
competitors to levels seen in states with thriving competitive markets.
Current law gives the PRC and
Qwest the ability to lessen regulation in areas where there truly is
competition, and so I do not see a great need for this bill. On the other hand,
I do not see it as resulting in detriment to consumers, and thus I have taken a
neutral position. Of course, I would re-evaluate this stand if the bill was to
change materially during the legislative process.
Constituents should be assured
that I will continue to represent the interests of residential and business consumers
in this and other PRC matters. Legislation identical to Qwest's early January
proposal (which would have deregulated everything except basic residential
services) is proceeding through the Utah state legislature and Qwest has
achieved or is pursuing similar initiatives in many other states as part of a
company-wide strategy. Here in New Mexico, our principled opposition has
succeded in maintaining a regulatory environment that protects consumers,
whether or not Qwest's proposed bill passes our legislature.
I welcome comments from
constituents and others in this matter.
Link
to bill text in pdf format
Statement
of Commissioner Jason Marks on HB 256/SB 470, Termination of the Rural
Extension Fund
At its Formal Opening Meeting of
January 25, I joined a majority of the PRC in voting to oppose a bill drafted
by Qwest that would terminate the current rural extension fund (REF).
The rural extension fund was
created in the late 1980s, when a change in federal tax laws was estimated to
have reduced US West's cost for its New Mexico operations by about $2 million.
Rather than reduce rates, the company and the Corporations Commission (PRC
predecessor) agreed to have US West devote the money to a fund to pay for extending
basic phone service lines in rural areas. Under rules in place for over ten
years, the fund picks up to $15,000 of the cost of extending a line to reach
the home of a residential customer who is on the fringes of Qwest's service
area (Qwest is US West's successor corporation). The number of line extensions
subsidies being requested under these rules are so few that only about $600,000
per year is being spent and the REF has ballooned to around $15 million.
If HB 256 (or its companion SB
470) became law, Qwest would have to use the accumulated funds to continue
to provide line extension subsidies equivalent to those at present, but would
be permitted to discontinue providing new funding to the REF.
I oppose this bill because it
effectively gives Qwest $2 million in additional rate payer revenue each year,
without the consumers in New Mexico getting anything in return. I believe it is
preferable to address the $2 million of ongoing Qwest obligations and the use
of the accumulated $15 million as part of comprehensive negotiations on rates
and services in the next Alternate Form of Regulation (AFOR) case that will
begin within the next year.
I welcome comments from
constituents and others in this matter. Constituents may also wish to contact
their State Legislators.