Help Keep the Texas Telecom Sector Competitive!

How is telecom being regulated in Texas?

• In 1995, the Texas Legislature adopted House Bill 2128, which significantly amended the state’s Public Utility Regulatory Act (PURA) with regard to telecommunications.

• The goal of the bill was to increase competition in the telecommunications sector by requiring local phone companies to lease parts of their network to competitors such as AT&T and MCI. The legislation created a different set of rules for new competitors as opposed to incumbent providers. The new competitors face fewer rules in setting price and meeting service quality requirements. In addition, current state law does not prevent regulators from creating new burdens on incumbent phone companies to lease parts of their network at very low rates.

• These policies are restricting growth in the state’s telecommunications industry, stifling job creation, diminishing telecom sector capital investment, and preventing millions from enjoying advanced technologies.

• Outdated regulations ignore the true competition that has emerged from a variety of technologies that do not face the same regulatory roadblocks. Wireless providers, cable companies, Internet Service Providers, and others are striving to provide the next generation of services for consumers.

What’s wrong with Regulating One Technology And Not Others?

1. The telecom industry has changed dramatically.
Competition in the telecommunications sector is present in Texas and growing rapidly from new sources, such as, cable, satellite and wireless providers. According to the latest available information from the FCC, wireless subscribers in Texas increased from 5.8 million in 1999 to 11.3 million in 2003, while landline service has decreased. This trend will continue, as will the advancement of technology that allows consumers to use the internet to make telephone calls (referred to as VoIP). The increase in wireless and other technologies assures healthy competition and a big future for a telecommunications market where free market principles are allowed to work.

2. Technology-wise, outdated regulation is keeping Texas telecom from its full potential.
Regulation is killing the incentives to build and invest in telecommunications infrastructure. Over time, competitors have reduced investments in new facilities, opting instead to lease from their competitors at artificially low rates that are unfairly set by regulators. At the same time, the local phone companies have little incentive to invest, because they must share this equipment with their competitors at below-market rates. As a result, nobody has strong incentives to invest in the “last mile,” which connects customers to the network and the high-speed backbone. The federal government has already taken steps to eliminate federal regulation of broadband. Don’t let state regulators block the road technological advancement in Texas.

What’s the Solution?

Texas legislators should continue its efforts to maintain the true competition now present in telecommunications. An open and competitive marketplace is the best guarantee that consumers will enjoy the widest range of choices in the emerging new market.

• As the legislature begins to rewrite the old laws on telecom, it should identify outdated regulations that stifle competition while fostering growth of a new market that allows all providers—phone companies, cable companies, wireless companies and others—to offer consumers the best products at competitive prices.

• Preventing regulatory barriers to broadband deployment can increase investment in broadband technology, providing employment growth and increased output in all 50 states. Two recent studies have suggested full broadband deployment would generate roughly 1.2 millions jobs throughout the nation. An additional study released by CSE FreedomWorks Foundation found that net new job creation would be beneficial to all 50 states including over 81,000 new jobs in Texas.