RALEIGH, N.C. – The state House decided Wednesday to free local telephone service providers from state regulation that for decades made sure the companies justified their prices, responded to consumer complaints and maintained service standards.
The House voted 102-11 to allow 16 providers that cover the state to cut loose from state Utilities Commission conditions setting the rates, terms and quality of their landline services.
Supporters said the phone companies need price deregulation because their former monopoly positions have been eroded under competition from wireless, Internet and cable television companies that are not regulated.
"It ensures that all [companies] are playing by the same set of rules," said Rep. Hugh Holliman, D-Davidson.
Market competition, not state oversight, would pressure big companies like AT&T and Embarq, and small companies like Ellerbe Telephone Co. and Pineville Telephone Co., to keep prices low and quality high, supporters said.
Opponents said while it was clear how companies benefited, it wasn't clear what consumers got from the bargain.
"In theory, there is a great deal of competition out there. But most citizens don't know there is an opportunity to change their phone company," said Rep. Paul Luebke, D-Durham. "Why would we want to deregulate? How are we benefiting consumers by deregulation?"
The bill would allow newly freed phone companies to set their own prices, except for stand-alone basic residential service. Rate increases for basic service would be limited to inflation adjustments. Rural customers also could not be charged more than urban customers for basic service.
The Utilities Commission regulates telephone, electricity, natural gas, water and other utilities that are allowed to operate as local monopolies because it didn't make sense for competing companies to each install their own lines or pipes. The regulated companies are guaranteed a fair profit, but only after the commission looks at the firms' costs and decides on a fair rate.
The old monopoly for local phone service no longer exists when the state's 7 million wireless phones are twice as many as all landlines, said Clifton Metcalf, a spokesman for AT&T, the state's largest provider with 1.7 million access lines.
"It's not possible for consumers to get the full benefit of a competitive marketplace when that marketplace is impacted by rules that were in place to regulate a monopoly industry that no longer exists," Metcalf said.
Advocates for consumers and the elderly argue that parts of rural North Carolina still lack wireless or cable telephone service.
"Many people in rural areas do not have other communications options," said Al Ripley, a consumer advocate for the North Carolina Justice Center. "It's going to be harmful for consumers because it deregulates service in North Carolina to such an extent that consumers will not be protected against rate increases and poor quality of service."
Tying price increases for basic service to inflation is good, Ripley said, but the Utilities Commission also has the power to cut rates, which happened four times this year in the case of Gastonia-based PSNC Energy.
Tennessee, South Carolina, Alabama (story here), Indiana, Mississippi, Missouri and Nevada have passed similar legislation. A report last year by the National Association of State Utility Consumer Advocates was critical of the benefits to consumers from price deregulation efforts so far.
"We look at these efforts skeptically because, number one, we don't see competition" for residential services, with wireless service often not replacing a landline telephone but adding to it, said David Bergmann, Ohio's assistant consumer's counsel and chairman of the NASUCA telecommunications committee. "We see it as a way to raise rates and lower service quality."