Now It’s Verizon’s Turn

Black phone

Lately I have been highlighting the many attempts of AT&T to become deregulated or to abandon landlines by the millions. But now it’s time to look at what Verizon is doing in Massachusetts.

Verizon has been able to get Bill H. 2930 introduced which is their attempt to become totally deregulated in the state. It’s a very short bill and the heart of it says that Verizon will become deregulated “in any municipality for which the company or carrier certifies to the Office of Consumer Affairs and Business Regulation that there are at least two providers offering voice telephone service to retail residential customers in that municipality using any technology, including but not limited to wireless voice service and VoIP service.”

Since there is no town in the state where there is not cell phone coverage or where Vonage and Skype are not available to residents, this would mean total deregulation.

This request makes us look at some really tough questions. Residential telephone penetration rates have plummeted in the last decade and are thought to average around 60%, down from the days when it was 98%. Businesses still mostly have telephones, but many of these phones are provided by competitors to the incumbent telcos.

At what point should the large telcos be deregulated, and what does such deregulation mean? Deregulation really boils down to just a few basic obligations. Regulated telcos are still the carrier of last resort. This means that they cannot refuse to serve a customer who requests service, within reason. The telcos have never been forced, for example, to build copper to the top of a mountain to serve one customer, but they are expected to build to add customers who are within a reasonable distance of existing telco facilities.

Deregulation also means that price caps would be removed from residential service rates and the telco would be free to charge whatever they want for residential dial tone. When you consider that local rates have been largely been frozen for a very long time in most states, the relative price of telephone service has gotten relatively cheap when considering the effect on other prices from a few decades of inflation.

There are other obligations to being regulated such as making sure that customers have access to 911. But this short law takes care to point out that the 911 and lifeline obligations would still remain in place.

So what does deregulation really mean? It might mean that prices will go up. But it also might mean that Verizon would have more flexibility to bundle local rates with features and with DSL in the same manner that the cable companies do it. One would not expect Verizon to impose a significant price increase in a market where people are already fleeing the product.

Probably the biggest change would be to the carrier of last resort obligations. Verizon could charge a considerable hook-up fee to build to a home that doesn’t have wires today. Or they could simply refuse to build to a home. Or they could charge large deposits to get new service. It could mean that the company could refuse to reconnect customers who miss a payment. This could also mean that they could let customer service deteriorate more and that a customer could be on hold even longer than today when calling the company, or perhaps customers would wait even longer to get repairs.

It’s a tough decision for regulators. It begs the question at what point does an incumbent stop being the carrier of last resort. Regulations made sense when the telcos had practically every home as a customer. But today the penetration rates for telephone service are greatly reduced and many of the customers who still have telephones use the cable company instead of Verizon. One would think that they already have less than half of the telco customers in most markets. There clearly ought to come some point where Verizon and the other telcos ought to be deregulated. But I don’t think anybody has an answer at where that point is at.

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