Telecom Regulations Harm California Consumers

Published November 1, 2003

A study released on August 27 by the Pacific Research Institute (PRI) shows that California consumers are experiencing an annual decline of $120 per average household in economic output because of poorly craft telecommunications regulations. Nationally, the loss is $101 per household.

Written by TeleNomics President Stephen Pociask, “Telescam: How Telecom Regulations Harm California Consumers” recommends that policy makers work to lift the complicated and market-distorting regulations that are costing consumer jobs and causing economic losses as well as significant declines in innovation.

“The recent Federal Communications Commission (FCC) Triennial Review Order gave state bodies more regulatory power in this area,” said Sonia Arrison, director of technology studies at PRI. “We hope the Public Utilities Commission (PUC) will seriously consider the results of this study while making their upcoming decisions.”

“One of the greatest problems in the telecom area is not market failure, but government failure,” Pociask said. “Public policies are currently set to help weak and inefficient businesses instead of encouraging efficient investment and real competition that will help consumers. Telecommunications investment has declined 40 percent in the last two years and this has resulted in job and revenue losses.”

California Competitive Local Exchange Carriers (CLECs) are abandoning their built facilities and flocking to rent the Incumbent Local Exchange Carriers’ (ILEC) facilities. This trend to rent, rather than build, accelerated when the California Public Service Commission lowered Unbundled Network Element Platform (UNE-P) prices by 40 percent. This is evidence that rates are predatory and harming facility-based investment, and this is happening in other states as well including New York, Florida, and Michigan.

Regulators should reevaluate current policies and encourage facility investment rather than encouraging freeloading and widespread dependency on handouts. State regulators should take advantage of the expanded power given to them by the FCC and implement rational wholesale telecom prices. This would benefit consumers by encouraging investment, creating jobs, and stimulating economic growth in California.

To download the study, visit