CLEARING THE AIR ON TELEPHONE DEREGULATION

Before the Senate Agriculture and Natural Resources Committee votes on HB 337, I wanted to respond to several erroneous statements made by the bill proponents in order that your decision be grounded in fact.

* In testimony before the Committee, the sponsor indicated that there was an ?unlevel playing field” because only the incumbent local exchange carriers were regulated by the PSC and others were not. The sponsor indicated specifically that Time-Warner was not subject to PSC jurisdiction.

In fact, all telephone service except for wireless service is regulated in Kentucky regardless of who provides it or whether it is provided by line or cable. Cingular Wireless, one of the "competitors" is in fact owned by BellSouth and AT&T, who announced during this month their intent to merge. The suggestion that the playing field is “not level” is a myth, since the loss of customers who have given up their landlines and who solely use wireless service has been minimal, and part of the loss that has occurred is from BellSouth to its related wireless provider.

* Competition in the wholesale market does not assure robust competition in the retail market, since the two dominant carriers can price at or below wholesale cost in order to drive competitors out of the market. The lack of transparency in pricing under the bill invites this market manipulation.

* Competition does not exist “throughout Kentucky.” The sponsor based this claim on the existence of 50-75 CLECs (competitive local exchange carriers) yet, as the PSC map of competitive local exchange carriers that was provided to you shows, in many areas of the state outside of the major urban areas, there are no competitive carriers.

Thanks for considering these points as you deliberate on the bill. And thank you again for the opportunity to have presented the concerns of the bills opponents before the Committee.

Tom FitzGerald
Director