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Chance or Luxury Tax?
By Horace Cooper
April 12, 2004

Today's telephones can do things today you only could imagine a few years ago.

Consider Opera Software, which rolled out its newest mobile system to allow customers to look up TV schedules and then press "record," programming their digital video recorder at home, even while they are on the other side of the globe.

Then there's the "Mobile Guardian," a new software package that allows parents to go online to limit outgoing and incoming calls on their teens' cell phones--thereby lowering fees and regaining control over who their children interact with.

Thanks to Sprint, video telephones (which allow you to record up to 15 seconds of video at a time to send to e-mail accounts or other equipped phones) will shortly be available on the market.

Innovation, competition and customer satisfaction are key hallmarks of a successful marketplace, and in most instances these factors are in place. Increasingly, however, this isn't the case with phone service, particularly landline service. And a recent Circuit Court of Appeals case, USTA vs. FCC, is going to make reform less likely.

The U.S. Court of Appeals struck down a Federal Communications Commission decision giving state regulators a role in determining which parts of the Bell networks should be available to competitors at cost-based rates. Throwing aside consumer needs and market forces, the court's decision increased the Bells' monopoly over broadband services.

This decision leaves consumers fearing that they've landed on the dreaded "Luxury Tax" space on the Parker Brothers' Monopoly board rather than passing "Go" and collecting $200.

Strangely, while the rest of the planet is embracing market-based solutions, the court held that Bell companies could limit the broadband options available to residential and small business consumers who receive voice services from Bell companies, without regard to consumer need or interest.

Under the decision, consumers who use Bell company voice services will only be able to receive DSL service from their Bell company. They won't have any other options, even if a competitor provides DSL in their city, town or building.

The FCC had rightly determined that the states were in the best position to determine what was right for local markets in their jurisdictions. The FCC's decision allowed for flexibility and assessments of the local needs of the community.

The Court of Appeals, however, threw that standard out, and along with it, consumers' best opportunities to get greater service and innovation.

On March 16, a group of U.S. senators asked the Bush administration to appeal this decision.

The Bell companies want no such thing, arguing they have been forced to lease their networks at below-market rates. They also say that allowing competitors to lease parts of their telephone wires reduces the incentive for long-distance carriers to build local networks.

A dozen economists led by James K. Glassman warn that, if left uncontested, the circuit court's opinion would hurt the economy and eliminate choice of carriers. And in fact since 1999, the average household's bill for local and long-distance telephone service has fallen by 23 percent, totaling household savings of $11 billion a year.

And lest you think this issue only affects family budgets, consider this: The U.S. Small Business Administration Office of Advocacy released a report entitled "A Survey of Small Businesses' Telecommunications Use and Spending," which, among other findings, noted that small businesses are disproportionately affected by telecommunications policies.

If the recent D.C. Circuit decision in USTA vs. FCC is allowed to stand, almost 23 million small businesses could suffer significant financial harm.

Rising phone rates this year aren't good for consumers, the economy or for the President's re-election campaign. For most households, gas prices are already sky high and families and small businesses will look at dramatic increases in telephone bills with a jaundiced eye.

Innovation, competition and consumer satisfaction are the solutions here, just as they are in other areas of the marketplace. Why not give the marketplace a "chance?"

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Note -- The opinions expressed in this column are those of the author and do not necessarily reflect the opinions, views, and/or philosophy of GOPUSA.