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Friday, March 13, 2009

Guest Blog by PRC Commissioner Jason Marks: Qwest Legislation Not a Good Deal for Consumers

Jmarks_3This is a guest blog by Commissioner Jason Marks who serving his second term representing District 1 on the New Mexico Public Regulation Commission.

Consumers ought to know about two pieces of legislation “sponsored” by Qwest that I have been opposing as they make their way through the 2009 New Mexico Legislature.

SB 445 – Qwest Price Deregulation

This bill would take away most of the PRC's authority to regulate Qwest’s and Windstream’s prices for telephone services, effective July 1, 2009. The only services the PRC could continue to price regulate would be the first basic residential or business line. (SB 445 originally permitted even the prices for these basic services to increase up to $1/month each July, but this was changed in response to opposition.) This means that if you have a second line at your house or business, Qwest could charge whatever they like for that service. It also means that if you take add-on features or a bundle of services from Qwest at your home, or use something other than a basic telephone line at your business; for example a Centrex multi-line system, ISDN, etc., the company will be able to charge you whatever they choose for that without PRC oversight.

Qwest’s justification for this legislation is that they are facing increased competition and they need to respond. The obvious question is, why would they need the ability to raise their prices in order to hold market share in a competitive market?

It is true that Qwest now operates in a competitive environment for many services in at least some parts of the state, and rate regulation ought to be relaxed where active competition is present. But there are also market segments in New Mexico where Qwest still has a virtual monopoly. This is clearly the case in rural areas the company serves, and there are even many pockets in Albuquerque where there is no alternative provider for home or business wireline phone service. One thing that would make SB 445 a little better would be a provision requiring Qwest to charge the same prices statewide. That way, customers in non-competitive markets would be guaranteed to get the same price Qwest was using in markets where it faced the most intense competition. But as it stands, SB 445 gives Qwest the "keys to the kingdom" with respect to pricing.

SB 445 also takes away the PRC’s ability to enforce quality of service standards by ordering customer credits. The PRC could still order fines. Currently, Qwest must pay all customers in a “wire center” a credit if they fall short on service metrics. Past Qwest quality shortfalls have resulted in credits that are more than the PRC's maximum fining authority. Also, under PRC rules eliminated by SB 445, Qwest must pay a meaningful credit to individual customers who have experienced a service shortfall such as an extended delay in repairing an outage or connecting a new service. Credits mechanisms provide an important check on Qwest quality of service in communities and markets where alternative services are not available to those dissatisfied with Qwest, and should not be eliminated.

SB 470 – Recovery of Relocation Costs From Telephone Customers

This bill allows Qwest and other regulated telephone companies to impose a surcharge on customer bills to recover costs of relocating lines and other infrastructure due to road construction projects. The PRC would be able to modify how the surcharge was imposed, for example, over how many months the costs were spread, but would not be able to say no or reduce the amount of the telephone company’s request below the company’s actual cost.

While this sounds plausible at first blush, the problem is that in 2000, Qwest and Windstream, our two largest phone companies, chose to stop having their rates set based on their costs. Instead, we have “alternative forms of regulation” (AFOR) plans. Since 2000, Qwest has dramatically reduced many of its costs; for example, it has unfortunately laid off a huge part of its New Mexico workforce. Because we now have price regulation, not cost regulation, Qwest has not shared any of these cost reductions with customers. Now, they want to get a surcharge so customers will pay this one category of costs without the PRC getting a chance to see how their overall costs have changed. By the way, line relocation costs are nothing new and I have to assume that they are already recognized in today’s rates, which are based on the old cost-based rates.

Testimony during a Senate Public Affairs Committee (SPAC) hearing suggested that the surcharge might be in the range of $1 to $2 per line per year (equivalent to $1 million to $2 million in relocation costs), but could be higher or lower. Although the SPAC approved an unfriendly amendment to SB 470 by Senator Asbill shifting responsibility from customers to the governmental entity causing the relocation costs, Qwest is working to un-do the amendment. This bill just needs to be defeated.

A final note

It's really important that consumers who are concerned about these bills contact their State Senator and Representative. Unfortunately, these kinds of bills are easy for corporate lobbyists to pass when they can slide under the radar screen without any public attention.

On a more positive note, I wanted to let you know we have secured a modest title insurance reform bill that opens the door to consumer savings from price competition and specifies large discounts for policies obtained for home refinancings. This was only possible through the strong support of House Speaker Ben Lujan and the advocacy of Think New Mexico.

This is a guest blog by PRC Commissioner Jason Marks. If you'd like to submit a piece for consideration as a guest blog, contact me by clicking on the Email Me link on the upper left-hand corner of the page.

March 13, 2009 at 02:17 PM in Business, Guest Blogger, NM Legislature 2009, Regulation, Telecommunications | Permalink


Next we need better regulation of the "health" insurance industry.

These bloodsuckers are free to collect as much from us as they can get, then deny us service based on bogus "health issues" when we ask for a more affordable plan.

I am furious they get away with this.

Posted by: Barbara Grothus | Mar 13, 2009 4:19:59 PM

Helpful to hear about these bills. There are so many that bills like this can get lost in the shuffle even though they are important.

Thanks Commissioner Marks!

Posted by: roadrunner | Mar 13, 2009 5:05:31 PM

I love hearing from officeholders on here. More, more, more.

Posted by: Chris | Mar 13, 2009 6:39:21 PM