Bill aimed at phone deregulation passes state Senate panel
Proponents say the measure would lead to lower monthly bills.  Critics say it would impede the Public Utilities Commission in protecting the public interest.
By Marc Lifsher, Staff Writer
Los Angeles Times
Wednesday, April 16, 2008

SACRAMENTO -- A drive to eliminate much of the last vestiges of conventional home telephone regulation by the state won a key endorsement Tuesday from a Senate committee.

Under the bill, state regulators would no longer analyze a proposed phone company merger to determine, for instance, if it is in the public interest or if part of the merger's savings should be returned to customers.

Sen. Alex Padilla (D-Pacoima), who wrote the bill, said he wanted to streamline a 19-year-old law to reflect a communications market that has been transformed by technology and by a 2006 law that deregulated much of the land-line service.

Critics, including current and former regulators, complained that the proposal would make it harder for the California Public Utilities Commission to evaluate adequately phone-company requests for mergers.

"The CPUC should be able to consider all the critical aspects of such a merger or acquisition," Commission President Michael R. Peevey and member Dian M. Grueneich said in a letter to the Senate Energy, Utilities and Communications Committee.

In a separate letter, the agency's independent Division of Ratepayer Advocates said the Padilla proposal "would erode the authority of the CPUC to protect the public interest."

In recent years, the commission has used its power to evaluate mergers as leverage to force phone companies such as AT&T Inc. and Verizon Communications Inc. to return hundreds of millions of dollars to ratepayers and to create special funds to encourage the spread of new communications technology.

Mergers, when they occur, typically lead to less competition, particularly for low-income people and those living in rural areas who often have poor or no cellphone or high-speed Internet service, critics said.

"The fact is that these carriers are dominant in their areas," said former Commissioner Geoffrey F. Brown. Reducing the commission's ability to oversee mergers could create "serious unintended consequences," he said.

But criticism from the commission and consumer groups didn't sway the Senate committee, which passed the measure on a bipartisan 5-3 vote. The bill now goes to the Senate Appropriations Committee.

The majority agreed with Verizon's argument that further deregulation would speed up the commission's process for approving mergers. The current set of criteria "harms consumers because it adds process delay and costs to some people who participate in the telecommunications marketplace," said Timothy J. McCallion, Verizon's Pacific region president.

Conventional land-line telephone companies now operate in a environment that involves competition for voice and data transmissions with wireless operators, cable systems and providers of voice over Internet protocol technology, he said.

Cutting red tape from the merger approval process should lead to lower monthly phone bills, said Sen. Dave Cox (R-Fair Oaks).

"What you eliminate is the possibility of a shakedown," he said, referring to demands that state regulators have placed on companies in past mergers.

According to an analysis of the Padilla bill prepared by the Senate committee staff, regulators have not used current provisions to thwart any recent telephone-company merger.

marc.lifsher@latimes.com

http://www.latimes.com/business/la-fi-phones16apr16,1,3663100.story