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MINNESOTA TELEPHONE ASSOCIATION Minnesota Telecommunications Guide January 2000
Telecommunications Reform is the
Right Thing to do Everybody agrees that telecommunications reform is necessary in Minnesota. The state's 126 pages of regulations (Chapter 237), originally written 85 years ago when horse-drawn buggies still shared our roads, now regulate a vastly changed and varied industry that includes Internet, wireless phones, and cable TV - with more new technology just around the corner. Everyone is concerned that the state not find itself divided into information "haves" (generally metro areas and larger businesses) and "have-nots," (especially rural areas) that would miss out on the benefits of new technology and e-commerce. But though there is general agreement on the overall goals, agreeing on how to fulfill them is another matter. The Minnesota Telephone Association (MTA) and its members, for example, think a recent 153-page plan offered by the Ventura Administration is actually "a step backward," in the words of the MTA's Jerry Knickerbocker. Common Goals What are the telcom reform goals commonly agreed to? Here's the list that an MTA committee will use to guide its discussions on the issue: - Elimination of outdated rules and laws - Streamlined regulation - Equal treatment of all providers of the same service - Regulation of telecommunications services, not telcom companies - Consumer protection - Setting up a fair mechanism to continue universal service - Establishing a single regulatory authority "The industry is pretty united that local competition is here or almost here," said Paul Hoff, General Manager/CEO of Park Region Mutual Telephone, based in Underwood, Minn. "Given that fact, regulations for incumbent companies need to be streamlined." Hoff would like to reduce current regulations by about 70 percent. He thinks recent proposals will have the opposite effect. "Neither the legislation introduced last year nor the current administration's plan will streamline regulations. If the goal is to provide incentives to deploy advanced telecommunications infrastructure, the vehicle to get there is one that makes companies comfortable with the regulatory climate. That means fewer regulations and a sufficient and predictable support mechanism for universal service. We could always count on the FCC to support us if we ran a line to an area that cost more to service than we could charge. The current plan puts that support for high cost rural service at risk. "The administration plan magnifies reporting requirements," Hoff adds. "It's inconsistent to talk about streamlining but ask for additional reporting. Local incumbent companies that don't meet certain goals would face more penalties than they do today. Turning back the clock on regulation is not the way to go. Our approach is to significantly revise what's there now and have the state regulate basic services only, acting more like a consumer watchdog than a strict regulator." Knickerbocker notes that while goals are similar, there's "a huge disconnect" between the industry's and the administration's views of how to achieve them. "The process they've chosen won't achieve the goals," he says. "We've evolved from a rate-of-return type of regulation to AFOR (alternate form of regulation) and the next step is de-regulation. The administration proposal seems to miss this point by seeking increased regulation of companies that have been partially deregulated." The Industry's Concerns "We support the governor and his goal of connecting the people of Minnesota with additional high-speed technology," said Mike Nowick, MTA Executive Secretary-Treasurer. "But everyone needs to realize that our state is already well-connected. Private companies have installed over 21,000 miles of fiber-optic cable to every corner of our state and will be installing more in 2000. Instead of spending taxpayer money on more of what the private sector has already provided, we want to work with the state to coordinate a unified approach to solve communities' telecommunications needs." This would include working with local communities to analyze their needs and to train people about how this technology can be used to benefit their communities. The industry makes these responses to the administration's proposed plan: 1. Lifting regulations when competition increases. According to Hoff and Knickerbocker, the administration proposal assumes every area needs or could support more than one high-tech service provider, when high costs and/or low demand make that unlikely (see the profile on Wikstrom Telephone and the Northwest Angle on the front of this issue). "Companies that have already deployed advanced capacity where competition is unlikely should be rewarded, not penalized as they are in the administration's plan," said Hoff. Knickerbocker says the plan "automatically re-regulates some companies that were de-regulated and holds them in a regulatory 'prison' until a 'facilities-based carrier' can reach at least a fourth of a company's customers. This is a one-size-fits-all approach that isn't realistic." 2. Limited sales tax breaks. According to Knickerbocker, the plan's tax breaks are limited to undefined advanced services and companies making future investments in the next four years. They don't go to companies that have already spent on infrastructure (Minnesota companies spent $320 million upgrading equipment in recent years). A better answer may be permanently eliminating the current sales tax on telcoms' capital equipment expenditures - something the Sales Tax Advisory Council has called for. It would be fair, treat all providers alike and would save the industry $25 million every year. Money that could be reinvested in more rapid deployment of services and facilities. 3. Eliminating "invisible" subsidies. If this happened, metro area customers have lower rates, but rural residents wouldn't be pleased to pay more just to keep the same level of services they have now. 4. Providing direct high-tech subsidies. Knickerbocker thinks the state needs to wait for the FCC to make up its mind about the national universal service fund before establishing state fund guidelines. "We'll know how much money we need to have, who should get it and under what circumstances when the federal government decides what the federal USF will cover," he explains. He also thinks that providing subsidies for advanced services is an expensive expansion of the original intent - providing basic service to all. "If the Legislature decides companies must provide access to high-tech services regardless of the costs, that's a political and social question and government must help subsidize the costs. But that discussion has not been held and that decision has not been made." 5. Allowing municipalities to provide telecommunications services. While private industry welcomes competition, its biggest concern is a level playing field. "Government shouldn't be in the business of competing with the private sector using tax dollars," says Knickerbocker. "All providers must be treated alike, so if municipalities are allowed to enter the field, they should be held to the same standards, rules and laws. There can't be any subsidizing of service with taxpayer dollars." A New Equation and a New Discussion Knickerbocker says the concerns that have been raised are about a plan that's not yet in bill form, but he says the proposal "seems to use a new regulatory common denominator. It's regulation by geography, not by company. The proposal would have a serious and disproportionate affect on rural Minnesota." But while industry harbors serious doubts about the administration's plan, all agree it has accom-plished one good thing - brought telecommunications reform to the front burner and started a serious discussion over what degree of change or type of regulation is necessary to help telephone companies meet the telecommunications needs of all Minnesotans.
MTA PROFILE: Wikstrom Telephone Company, Karlstad If an example is needed of a private Minnesota company providing rural customers with the latest in telecommunications services, we need look no further than Wikstrom Telephone of Karlstad. Founded in 1947, the company serves northwestern Minnesota towns with as few as 60 people over its 6,500 telephone lines. It also offers Internet service to various communities and partners with cable TV, CenturyTel and local schools to extend advanced services to remote areas. In fact, Wikstrom, which began installing fiber optic cable 12 years ago, just finished connecting one of America's remotest places - the Northwest Angle - to today's information superhighway. The "Angle" has the state's last one-room elementary school and the closest grocery store is 50 miles away. Residents received their first telephone service - via radio - in 1981. But radio, and a subsequent cellular system and marine band radio, were expensive, provided limited service and offered little privacy. The Angle's residents and resorts needed to report medical emergencies or fires more quickly. Residents and businesses needed payphones, fax machines and Internet access to stay connected to the world. So Wikstrom installed "hard-line" phone service on the Angle's mainland in '91 and digital service two years later. In its continuing efforts to provide its customers with the same high-tech connections available elsewhere in the state from private companies, Wikstrom recently connected four Angle islands - and their 64 customers - by laying underwater (11 miles) and underground (20 miles) cable. Islanders not only have modern connections, they receive free custom calling services (call waiting, caller ID, speed dial, etc.). The result is what everyone wants - rural areas included in the information age.
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