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The state public utility commissions have traditionally had the reputation of being in the hip pockets of the telephone and electric companies that they regulate. While some state commissions have changed that perception and are now viewed as pro-competition and pro-consumer, others have perpetuated it. As I write this column, the Maryland General Assembly is in the process of dismantling the Public Service Commission because it granted a 72 percent rate increase to Baltimore Gas and Electric, and a 38 percent increase to Pepco (which serves the Washington, D.C. suburbs).

Jeffrey Krauss
And in South Carolina and Nebraska, the state commissions have protected the rural phone companies from competition, by prohibiting Time Warner Cable from providing VoIP (voice-over-IP) telephone service to rural portions of the states.

This VoIP controversy centers around interconnection disputes. The rural phone companies don't want to port telephone numbers, provide E911 interconnection, support CALEA requirements or do anything else for competitive telephone services, and they've convinced the state commissions to back them.

The rural telephone companies argued, for example, that the FCC has not yet determined whether VoIP is a telecommunications service, and therefore they have no obligation to interconnect. To try to clarify the obligations in South Carolina, Time Warner filed a request for a Certificate of Public Convenience and Necessity, so that it would have the right to negotiate interconnection agreements with the rural telephone companies. The rural telephone companies objected. The state commission granted the Certificate for most of the state, but denied it for the areas served by this handful of rural companies.

And then there's the controversy over interconnection with wholesalers. In many states, VoIP operators buy wholesale interconnection services from Sprint or MCI. Sprint and MCI (now part of Verizon) have business units that have interconnection agreements with all the small telephone companies. So if you port your old telephone number to your new VoIP service, Sprint or MCI might handle the paperwork for the VoIP operator. If you call 911 from your VoIP phone, Sprint or MCI might own the interconnection trunks and databases to get the call to the right public safety agency.

In South Carolina and Nebraska, the small telephone companies have taken the position that they have no obligation to interconnect with wholesale customers of Sprint or MCI. Their only obligation, they said, is to interconnect with retail customers. And their state commissions agreed.

Now, in fact, those two states are not in the majority. For example, state commissions in New York, Illinois, Iowa and Ohio have ruled that phone companies do have an obligation to interconnect with VoIP services and the wholesalers they use. But the decision in New York is being reviewed on appeal in Federal Court, and a new interconnection dispute is pending in Texas. And other states have yet to make decisions.

I should point out that it is not the big phone companies like Verizon and SBC/AT&T that are causing this problem. The FCC previously made it clear in its decision on VoIP E911 obligations that the big phone companies had been impeding interconnection, and they'd better stop. And they did.

Now the villains are companies like Hargray Telephone Company (serving Hilton Head), Home Telephone Company (serving 24,000 access lines in Moncks Corner, S.C., 30 miles north of Charleston), PBT Telecom (serving 17,430 access lines in Gilbert and Ridge Spring, S.C., 20 miles west of Columbia), Berkshire Telephone Corp. (serving 6,700 access lines and located in Columbia County, 20 miles south of Albany, N.Y.) and Brazos Telecommunications (serving 4,550 access lines in a 300 square mile area about 90 miles northwest of Fort Worth).

After two years of battling at the state commissions, Time Warner finally got tired of fighting on a state by state basis. On March 1, it filed petitions with the FCC to overrule South Carolina and Nebraska, and to pre-empt the state commissions from future rulings. And what did the telephone companies and state commissions do? Why, they immediately asked for an extension of time to file comments, because of the "complexity" of the issues...on the theory that, if you don't expect to win, at least try to delay the defeat.

It turns out the issues really aren't complex. Wholesale telecom services are entitled to the same interconnection services as retail services, and there are plenty of FCC rulings to that effect. And states are not allowed to carve out the areas of rural telcos and protect them from competition. For example, in 1997 the FCC overruled a Wyoming state commission decision to protect a rural phone company from competition.

We've had telephone competition in this country for the last 30 years, and the phone companies continue to fight it.

I know that sooner or later my electric rates will go up. Later, I hope. And I know that sooner or later the FCC will overrule the South Carolina and Nebraska commissions. Sooner, I hope.

Have a comment? Contact Jeff via e-mail at: jkrauss@krauss.ws

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