Subject: [NEXTEL-1] Former Regulator Presents Arguments Against Cell Phone Users Bills of Rights

From: Marcel <[email-masked]>
Date: Fri, 02 May 2003 15:49:31 -0400

Former Regulator Presents Arguments Against Cell Phone Users Bills of Rights

The former chairman of the Illinois Public Utility Commission argues that cell
phone users bills of rights proposed at the federal level and at the state level in
California would stifle the convenience, innovation and competition that
currently characterize the U.S. wireless industry. Terry Barnich, now an adjunct
fellow of the Hudson Institute and president of the consulting firm New
Paradigm Resources Group, cites the sharp decline in average monthly bills,
the variety of new services, and continuing improvements in the quality of
service brought about in a market where all Americans can choose from at
least three wireless carriers, and 80 percent can choose among six to eight
carriers. The proposed California bill could, according to studies sponsored by
the wireless industry, raise by about $5.75 per month the cost of service to
customers of major wireless carriers, and by $10 to $12 per month the cost of
service for customers of smaller carriers. Barnich called that "paying
protection," not "getting protection" from regulators.

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May 1, 2003
Do Cell Phone Users Need a Bill of Rights?
by Terry Barnich

No longer a luxury, cell phone service is probably number one among conveniences we love
to hate. Not content to leave well enough alone, however, some politicians and bureaucrats
are preparing regulations that will gut much of the convenience right out of the service.

Perhaps inspired by recent interest in America’s Founding Fathers, the consumer movement
has been drafting a variety of “bills of rights.” There are bills of rights for medical
patients, airline passengers, grandparents, and even moviegoers. Now comes the “Cell Phone
Users Bill of Rights.” Leading the charge in Congress is New York senator Charles Schumer,
who reasons that a federal bill of rights is needed to “foster competition” and “[make] it
easier for consumers to choose plans.”

Schumer reckons that the Federal Communications Commission’s (FCC) failure to open up the
local telephone monopoly compels the regulation of the wireless market. This is another
inexplicable non-sequitur for which our politics is becoming known. However concentrated
the local hard-wire telephone business is, by any reasonable measure, the wireless market
is hyperventilating with competition.

According to the FCC, virtually all Americans today can choose among at least three
wireless carriers and over 80 percent of the population can choose among six to eight.
Competition has resulted in average monthly wireless bills falling from $95 per month in
1998 to about $47 per month in 2002. The number of service options and the variety of
calling plans available to consumers multiply almost weekly. Quality measuring metrics
reflect continually improving service quality. An undergraduate economics major might
label these conditions a vigorous competitive market.

Even in the face of this free-market success story, some state utility regulators are
embedding themselves in Senator Schumer’s misguided movement, convinced that the public
needs protection from the wireless market. That is shameful, because utility regulators
are paid, if for nothing else, to recognize the difference between monopoly and
competitive markets and to forebear mucking up the latter with unnecessary regulation.

Most notably, there is a move afoot within the California Public Utility Commission,
working with some self-styled utility consumer advocates, to impose a dense set of
regulations that will displace free-market control over many of the terms and conditions
of wireless service in that state. This will beget a case of inadvertent consequences with
a vengeance. Cell phone users will pay for bureaucratic intervention with higher bills,
less convenience, and fewer services and innovations. In Chicago we call this “paying
protection,” not “getting protection.”

Economic studies sponsored by the wireless industry demonstrate that implementation costs
of the California rules will translate into an increase in the average monthly wireless
customer’s bill of about $5.75 per month. And that’s only for customers of the big
national carriers. Customers of smaller carriers may see their bills rise by between $10
and $12 per month. That’s like getting only twelve months of service for the price of
thirteen or fourteen months.

With that kind of price-hike, customers should expect a commensurate increase in service.
But if these rules are enacted, consumers will only be buying more hassles and a
degradation of overall service.

Here are just a few examples:
The popularity of wireless communications rests in its mobility and convenience. If you
want, you can go into the neighborhood Best Buy or Circuit City, buy a phone-in-a-box,
then go home and activate it online or over the phone. Under the proposed California
scheme, however, you can pretty much say goodbye to that convenience, because the rules
require a written authorization from the customer before service can be initiated. In the
land of the Internet, the quill pen is being mandated.
The same goes for any changes in service the customer may want to make. Today most
carriers will make almost instantaneous service changes online and over the phone.

That can’t happen if the customer has to mail or fax a signed authorization first. Of
course, the rules do permit an over-the-phone change order if the customer submits to a
third-party verification process, which is the regulatory equivalent of playing a time
consuming game of twenty questions. Either way, the customer’s flexibility to choose is
diminished.
Also at risk is the dynamic innovation that is the hallmark of wireless service. One
proposed rule would require every carrier to embargo any new service introduction that may
have “privacy” implications for the customer until the utility commission approves it.
Naturally, in the spirit of defining what “is” is, the regulators alone determine whether
privacy is implicated by the proposed new service.

Service providers compete on being first to market new services. Requiring regulatory
“Mother, may I” pre-approval for new services guarantees delay and insures any new service
submitted for review will loose all competitive advantage because competitors will get a
peek at it too. You could not design a process more likely to stifle innovation.
I have a better idea for a bill of rights than another doomed-to-fail scheme from
California. “Regulators shall make no rule infringing an American’s right to create,
participate in and benefit from a wireless free market.”

Terry Barnich, an adjunct fellow of the Hudson Institute, is president of the consultancy
New Paradigm Resources Group and is a former chairman of Illinois’s public utility
commission

http://ao.hudson.org/index.cfm?fuseaction=publication_details&id=2842&pubtype=DailyArticles

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