Orange County Register, September 22, 2003

PUC proposal to closely regulate cell-phone firms has no logic behind it

Most people don't think of their cell-phone provider as a "utility," a word that evokes images of old wire-line phone companies that didn't work well or offer much choice. But if a state Public Utilities Commission proposal is approved Oct. 16, that's exactly what Californians will soon face.

The "Telecommunications Consumer Bill of Rights," introduced by PUC Commissioner Carl Wood, is supposed to protect consumers and "allow the PUC to evenhandedly enforce such protections." In other words, Wood wants to standardize the behavior of telecom companies to a level set by bureaucrats.

It only takes one memory of standing in line at a DMV to know that bureaucrats are not especially good at setting service standards. More worrisome is the anti-competitive effects that government-imposed standardization would cause.

Government regulations make businesses less flexible and able to change to suit consumer demands. Strict rules, like those in the so-called "Bill of Rights," are a step away from an innovative, responsive marketplace and a step toward a more monopolistic industry.

While no one would argue that the wireless industry is perfect, it's a testament to the power of market discipline that a nationwide survey of wireless customers by the Yankee Group showed that nearly four out of five customers rated their cell service as a "good" or "excellent" value. The figures in California are even higher.

According to Thomas Hazlett, former chief economist at the Federal Communications Commission, last year, there was less than one complaint for every 1,000 California wireless subscribers. So why is the PUC considering heavy regulation?

Public choice theorists would argue that it's an attempt to expand bureaucratic power. But even if it's truly to protect consumers, it remains unclear how dictating that solicitations be in 10-point type or larger will achieve this goal. In typical bureaucratic form, the proposal contains dozens of complex rules micromanaging the interaction between wireless companies, consumers and their government helpers.

For instance, each telephone bill must "include address, phone number and e-mail address of the CPUC and the FCC where billing or service questions and complaints can be submitted." Another rule says "every carrier must designate one or more representatives to be available during regular business hours to accept PUC Consumer Affairs Branch (CAB) inquiries and requests for information."

When California wireless companies have a complaint rate less than 0.1 percent, it remains a mystery why anyone thinks it makes sense to spend money financing these positions. Forcing wireless firms to spend untold amounts of money complying with unnecessary rules at a time when the economic slowdown has vaporized the healthy profit margins of the past spells bad news for consumers. It will mean higher rates for wireless service and less investment in improving wireless coverage areas and call capacity. And for what benefit?

Today, wireless phones work better and across a far greater area than when cellular service was first introduced. A cell phone used to be the size of a brick, and the cost to make a five-minute call could surpass the price of a movie ticket. Today, phones are small and sleek and weekend service usually free. People from every socio-economic group possess one of these devices - all without government intervention.

One key reason these goods have improved and spread across such a wide swath of society can be explained by competition among providers, but that competition will decrease if more regulations are piled on wireless carriers.

Currently, six major national carriers compete vigorously against one another, and a host of smaller regional carriers add to that competitive brew.

As with most business transactions, consumers ask questions before signing up with a wireless carrier. For those who don't, most carriers offer grace periods that allow cancellation of the contract without paying an early termination fee (generally about 14 days).

California's economy is in shambles and the wireless industry is serving consumers very well on its own. What Carl Wood and the PUC call a bill of rights is a simple expansion of bureaucratic turf. Californians should hang up on this harmful and unnecessary proposal.

Sonia Arrison is director of the Center for Technology Studies at the San Francisco-based Pacific Research Institute. She can be reached via email at sarrison@pacificresearch.org.