Opponents say there’s not enough ’effective competition’ in available service. Qwest disagrees.

REGISTER BUSINESS WRITER
Not long ago, Iowans had only one option when ordering telephone service: the local phone company serving their area.

These days, consumers buy telecommunication services from a number of competing wireline, wireless and cable television providers. State regulators are scheduled to rule today whether those choices form enough competition to allow the market — not the state — to determine phone rates.

The Iowa Utilities Board is considering telephone deregulation in Sioux City, Council Bluffs and 22 smaller markets. The board is also considering deregulating second residential telephone lines throughout the state.

Deregulation in other states has produced mixed results for consumers. Nebraska saw little change in rates, while fees increased in Ohio, consumer advocates say.

Iowa law allows deregulation if the board finds «effective competition.»

Deregulation opponents, including rural Iowa phone companies and national long-distance carrier AT&T, say Iowa does not yet have effective competition. But Iowa’s largest local phone company points to increasing communication choices.

«There’s a lot of competition out there,» said Max Phillips, Qwest’s state president for Iowa. «It’s all shapes and sizes, and more is on the way.»

Qwest and other regional phone companies are legacies of a monopoly era shaped by regulation. But the Telecommunications Act of 1996 allowed other providers to compete against the «Baby Bells» for customers.

Now phone companies can compete in service territories of rivals. Long-distance carriers like AT&T were allowed into local markets. Cable television providers like Cox Communications launched phone services. In some cases, cities themselves offered telecom services.

Qwest advocates telephone deregulation statewide. That would be a mistake, Cox Communications attorney Bret Dublinske said in comments to the board. Cox, which has about 1 million access lines in 10 states, is not an equal to Qwest, which has more than 14 million lines in 14 states.

«Its size and reach — built without risk due to regulatory protection — dwarfs any other fully facilities-based competitor operating in Iowa,» he said.

Curtis Eldred, manager of Cedar Communications in Stanwood, told the utilities board he’s at a competitive disadvantage. A deregulated Iowa Telecom could cut prices in his territory and recover revenue in its regulated areas — an option he does not have.

«It is unlikely (Iowa Telecom) would be significantly affected financially if it operated at a loss in Stanwood,» he said.

The Iowa Office of the Consumer Advocate, a state agency that represents consumers in utilities matters, supports deregulation in the 22 smaller markets but not Council Bluffs or Sioux City.

In those two cities, companies rely on leasing agreements with Qwest to compete, attorney Gary Stewart wrote in a filing. Long-distance companies like AT&T, for example, do not own their own lines reaching customer homes. Instead, they lease access to Qwest’s network. The arrangement leaves competitors and consumers vulnerable to Qwest pricing changes.

That contrasts with the smaller markets under consideration where independent phone companies have built their own networks to compete for customers, Stewart said.

The state’s deregulation inquiry comes as the Federal Communications Commission is rewriting rules determining how Qwest and other Baby Bells share their networks with competitors. The Bells have said they have been forced to open their networks to competitors below their cost of operating them. Recent federal court rulings have favored the Bells. The FCC is scheduled to issue new rules next month.