It's Going to Cost Cell Phone Users

by Jack Stewart
June 1, 2004
Under the guise of doing something for you, the California Public Utilities Commission is about to pick your pocket. Unfortunately, it's actions will also harm the California economy.

The commission is pushing forward with wireless communication rules that will affect the 19 million cell phone customers in California. As a practical matter, the rules will increase costs and bureaucracy and take away consumer choices for wireless service.

These rules, with the friendly title of ``Consumers Bill of Rights,'' are actually the ``Consumer Bill of Wrongs.'' They impose bureaucracy and extend liability provisions that will increase costs for industry and for consumers. Instead of improving service, the rules will take resources out of necessary infrastructure and hiring, and require companies to invest in bureaucracy.

If the commission adopts these rules, small carriers will go out of business, calling plan choices will evaporate, and ``no contract'' simple calling plans will likely become a thing of the past -- even as these services are gaining in popularity among consumers. Small carriers will be disproportionately affected because they lack the scale and resources to absorb the latest regulatory burden. The commission's one-size-fits-all approach, in fact, will undermine the ability to provide a wide range of discounted calling plans for consumers.
The commission started working on these rules four years ago, and they ignore the dramatic changes in the industry since then. They would take us back to the bad old days when California had among the highest wireless rates in the country. In fact, an analysis of the market when California last regulated cell phone service shows that consumers paid $363 million more for service than they should have. It will be far worse today than it was then. In the mid-'90s, when the state last regulated wireless, there were just over a million wireless users. Today in California, there are 19 million wireless customers.

It won't just be consumers that are harmed. Wireless and related technologies support some 60,000 California jobs and $3.5 billion in payroll. There are also some 2,000 wireless companies of all sizes that will be hurt by these rules.

It isn't too much to expect the commission to carefully analyze and consider the potential costs of the proposed rules. Instead, it has ignored this basic accountability requirement.

What happened in the decade since deregulation to justify re-regulation? Wireless prices have fallen by 82 percent. Today consumers have multiple choices among carriers and calling plans, and wireless complaint rates are among the lowest alongside other utilities and service businesses. Not a bad track record.

Wireless is a customer-driven marketplace. If wireless companies don't respond to customer needs, they lose customers. Today, across California, consumers have multiple choices among wireless carriers and calling plans. However, the effect of the proposed wireless regulations will be to reduce the number of companies providing service and limit calling plan options. The new rules will essentially set up California as a separate market within the United States: separate rules for contract disclosures, separate advertising, unique extended liability provisions.

Gov. Arnold Schwarzenegger has it right: Regulation should occur only where it is necessary and when it does not harm consumers. These rules should go back to the drawing board.

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