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June 6, 2005
Room 302, Capitol Building
Cheyenne, Wyoming
Senator Cut Meier, Co-Chairman
Representative Pete Illoway, Co-Chairman
Senator Cale Case
Senator John Hanes
Representative Marty Martin
Representative Bruce Barnard
Lynda Cook, Staff Attorney
Please refer to
Appendix 1 to review the Subcommittee Sign-in Sheet
for a list of other individuals who attended the meeting.
Co-Chairman Pete Illoway called the meeting to order at 8:00 am. The following sections summarize the Committee proceedings by topic.
The Subcommittee took testimony from various stakeholders present at the meeting.
Mr. Ellenbecker restated the principles that should be considered in any new telecommunications legislation. (See Appendix 2).
The subcommittee should strive to put downward pressure on prices through competition. TSLRIC is a floor and does not allow downward pressure. The statute should provide for a price cap instead, with strict mechanisms for raising the cap if necessary. Caps could be set at existing prices or set based on policy considerations.
The committee should focus on local service areas.
The public service commission should focus on monitoring for market abuses.
Incumbents should not be required to make filings that C-LECs don't have to.
The subcommittee should retain full regulatory authority of wholesale transactions, consistent with federal law.
Incumbents should be required to continue to provide local exchange services and 911 and e-911 capabilities.
The universal service fund should remain but should become a cost based fund.
Lifeline and linkup programs should remain intact.
Mr. Ellenbecker responded to questions from the subcommittee. He did not advocate a particular position on what price should be used to set a price cap, but warned the committee to be careful to consider all the ramifications of the choice and to ensure that the cap could not cause upward pressure on the universal service fund.
The Office of Consumer Affairs (OCA) brought proposed legislation (Appendix 3). The legislation eliminates TSLRIC, continues to prohibit cross subsidization, and keeps regulatory authority with the commission. The OCA also provided a presentation paper that describes each principal they attempted to address, why the principal is important, and how they addressed the principal in the proposed legislation. (Appendix 4). The proposed legislation repeals many of the provisions that have been completely implemented and are no longer necessary.
Mr. Freeman and Ms. Parrish responded to questions from the subcommittee. They had no specific language to propose for rewriting the universal service fund provisions but they provided several options on how to address the USF. They stated that state statute does not need to be changed at this time to deal with interconnection because the federal government is currently looking at making the necessary changes. A rewrite of the federal statute is in the early stages, but it is imminent. They advocated elimination of differences in regulation between large and small markets. They support the idea of a price cap on essential and non-competitive services. They believe switched access should also be regulated because if the state does not regulate both there may be upward pressure due to cross subsidization.
Senator Case expressed concern over the OAC proposed changes to the intent clause and that the changes essentially maintain a monolithic regulatory program for the protection of small areas of the state. The OAC stated that their proposed changes eliminate much of the act but do leave in protections for areas where telecommunications would otherwise become unaffordable. There was some discussion as to when wireless would be "effective competition". Ms. Parrish agreed to provide the subcommittee with statistics on average wireless usage.
The WTA provided a list of principals that the membership agreed upon. (See Appendix 5). The key issue is to establish parity between all market participants through deregulation. Because the state cannot regulate wireless and cable, the only way to establish parity is through deregulation. The WTA has not come to consensus on whether "bill and keep" methods of billing wholesale access charges would be feasible. Rural carriers do not like it and larger carriers do. Ms. Ortega encouraged the subcommittee to direct the commission to look at how any regulation of access charges would affect other areas of telecommunications.
Qwest would like to see regulatory parity in the industry, but would also like to ensure that any approach to regulation would ensure consumer protection. They believe that distribution of the universal service fund should be competitively neutral. They encourage elimination of TSLRIC but want the subcommittee to consider how doing so will affect the USF and how coming changes to the federal USF will affect the state program. The main issue with state USF is to avoid insolvency. With respect to wholesale markets, Qwest would prefer to leave regulation under the federal act at least until we see what changes are coming in the federal act. They support the concept of "bill and keep" access charges. With respect to cross subsidization, Qwest supports continuing to prohibit it because the market is working properly.
Ms. Zerga agreed in general with the principals set forth by Steve Ellenbecker with some differences in the details. She supported elimination of TSLRIC but wants the subcommittee to take into consideration how doing so will affect other areas of telecommunications. Specifically, the filings required under TSLRIC gave the commission a clear picture of whether cross subsidization was occurring. Any new legislation will need a mechanism to clamp down on cross subsidization in monopolies. Ms. Zerga's clients would like to see a cap on access charges and authority for the commission to monitor and mediate access/interconnection agreements.
With respect to wholesale issues, Ms. Zerga would like to see clear language that the state has a role in regulation as delegated by federal law. There is concern that although the federal law clearly gives the state some authority over wholesale transactions, there is no correlating state law provision recognizing that authority.
Ms. Zerga advocated a simple approach to fixing USF by capping USF distributions on a zone basis and making the distributions portable to substitute services. The harder approach would be to make USF distributions cost based.
Ms. Zerga answered questions from the subcommittee about cross subsidization of local lines through access charges. There is concern that subsidies distort the decision making by consumers because they do not see the actual costs for services.
Dr. Egan reiterated the prepared statements he submitted to the committee after the last meeting. (See Appendix 6). He believes the stakeholders are coming close to reaching a consensus on what needs to be done. He encouraged the subcommittee to be proactive and not to wait for changes in the federal law. He also explained the cost data that is available from FCC filings and how that may be used to set up a cost based pricing cap.
Mr. Jackson set out the principals he thinks need to be addressed:
The consumer has to come first and has to be protected.
There needs to be legal and regulatory parity.
TSLRIC should be eliminated; it is now only a barrier to downward pressure on prices.
Consumer prices and access rates should be capped.
Caps should be statewide rather than based on what companies are charging now because there is too much diversity in access charges right now.
Lifeline and Linkup programs should remain.
A cost based USF is appropriate.
The subcommittee should consider sun setting or eliminating the state USF program because the federal USF is adequate.
The commission should do more to protect consumers and do less regulating.
Cross subsidization should be technologically and competitively neutral.
"Bill and keep" of access charges will be a reality.
Hypothetical costs based on TSLRIC have caused a disparity in distribution of USF funds.
Mr. Roberts stated that cross subsidization from access charges to lower local service lines is inappropriate because it is not reciprocal between wire line and wireless carriers. Sprint wants to see regulatory parity, but that does not mean they want to see new regulation on new technologies.
Mr. Hurless stated that although the stakeholders are coming to consensus, it will be difficult to deal with the fact that there are really two Wyoming constituents: the urban areas that have effective competition and the true rural areas where provision of services is too expensive to allow for competition. He compared total deregulation to airline deregulation where rural areas lost services. He stated that cross subsidization should still be prohibited because it provides a clearer picture of the true costs of a service. When asked whether the PSC is ready to start regulating wholesale transactions, he stated that it depended on the level of detail required by any new regulatory scheme.
Senator Meier distributed his ideas for proposed legislation. (See Appendix 7). Bruce Asay provided comments on the proposal. Jim Ceballos of Qwest suggested that the stakeholders take the principles that were covered in this meeting and the proposals brought by the OCA and Senator Meier and create a task force of stakeholders that will bring a proposal that has consensus. The subcommittee agreed to meet again on July 6th where they will review and work on the proposal brought to them by that task force. Chairman Illoway requested that the stakeholders include other interested parties, such as Farm Bureau and AARP in their process. Steve Ellenbecker will take the lead in organizing the task force.
There being no further business, Co-Chairman Illoway adjourned the meeting at 2:30 pm.
Respectfully submitted,
Pete Illoway, Co-Chairman