Academic journal article Journal of Broadcasting & Electronic Media

Regulatory Autonomy and Policy Innovation: Local Telephone Competition in Arkansas and New York

Academic journal article Journal of Broadcasting & Electronic Media

Regulatory Autonomy and Policy Innovation: Local Telephone Competition in Arkansas and New York

Article excerpt

In the pre-divestiture environment, the state Public Utility Commissions (PUCs) did not play a very visible role in the regulation of the telephone industry in the United States. While they had jurisdiction over intrastate telephone service, they operated for the most part as the proverbial cogs in a fairly unified national regulatory system. Typically, the Federal Communications Commission (FCC) set the course by formulating federal policies, and the state PUCs made corresponding changes, sometimes after a little friction, in their intrastate policies in order to harmonize the overall system. As Glen Robinson (1991), former FCC Commissioner (1974-1976) recounts:

 
   The state regulatory presence became more noticeable in the 1970s, though I 
   cannot honestly say I, as an FCC Commissioner, noticed it much. Perhaps it 
   was my parochial attitude to think that all action--such as it was--took 
   place at the federal level. It seemed to me, at the time, that the state's 
   principal role was to quarrel with the FCC over how much local service 
   should be cross-subsidized by rates on interstate service. (p. 83) 

For the most part, the interests of the PUCs were limited to ensuring affordable rates for residential local telephone service (Briesemeister & Horrigan, 1989). Accordingly, they remained preoccupied with the intricacies of the separations procedures that determined the amount of subsidies that the local service would get from long distance. Although there were differences among the PUCs in terms of their composition and the way they conducted their business, these were relatively small compared to the similarities in their policies. In effect, the 50 state PUCs and the FCC worked as a single monolithic system.

The divestiture turned this placid world on its head. According to Neilsen Cochran, Mississippi Public Service Commission (MPSC) commissioner, "the majority of the commissioners and staff throughout the country were ill-prepared for the divestiture of AT&T" (Cochran, 1986, p. 13). After having operated in the background for 75 years, the divestiture thrust the PUCs into the limelight as the "venue shopping" Baby Bells brought their problems to them, sensing a more sympathetic hearing there than at national forums where AT&T had considerable influence (Bonnett, 1996; Teske, 1990). Also, while the divestiture partially resolved some of the national issues, it created many new ones at the state level (Teske, 1990). Somewhat shell-shocked at the sudden paradigm change, the PUCs' reflex reaction was to grab at their old issue, universal service, with even greater fervor. In the words of Commissioner Cochran, "The preservation of local exchange service is my number-one priority, and this newly created environment must be treated as cautiously as one would handle a loaded gun" (Cochran, 1986, p. 13). Soon, the PUCs found themselves at odds with the FCC over universal service and other issues. Furthermore, as different interest groups realized the importance of telecommunications in the new economy, local politicians stepped into an arena that had earlier been a preserve of technocrats. The PUCs could no longer afford to limit themselves to narrow accounting matters. As Charles Stalon (1984), the commissioner for the Illinois Commerce Commission, noted in 1984, one of the major casualties of divestiture was the form of regulation (1) employed by the PUCs.

 
   My view, stated briefly, is that the blow is fatal although artificial 
   life-support mechanisms provided by the industry and the Federal 
   Communication Commission (FCC) may preserve appearances of life for some 
   time to come. Note carefully my argument is not that state regulation by 
   Public Utility Commissions (PUCs) is fatally wounded. That question is 
   still open. My argument is that the current forms of such regulation are 
   fatally wounded. … 
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