Janee Briesemeister and Philip Treuer
The state of Vermont is in the midst of developing an innovative regulatory framework for telecommunications. In June 1987 the legislature passed a statute that allows the state's dominant local exchange telephone company, New England Telephone, and the state's Department of Public Service (DPS), as representatives of the public, to negotiate a "social contract" subject to approval by the Public Service Board (PSB). The contract is an agreement between the industry and the state by which the company agrees to stabilize basic phone rates and modernize plant and equipment in exchange for the elimination of rate of return regulation and the loosening of some regulatory restrictions on competitive services. Replacing rate of return regulation with the new social contract approach is a radical departure from traditional utility oversight. The Vermont social contract is important to study as the first attempt by a state to rewrite the rules on utility regulation.
A second aspect of the legislation also outlines the role of the state as a telecommunications user and planner and implements new procedures to help the state use telecommunications more efficiently. Each of these two aspects of the statute demonstrates an innovative, forward-looking approach to telecommunications regulation and planning. Each was framed with the hope of encouraging business development in the state by encouraging the growth of sophisticated telecommunications services at competitive rates.
As the telecommunications environment is changing, so, too, are state responses to what was once a completely rate-base-regulated monopoly utility. States are challenged by the growing demand for technologically advanced telephone company services that are adaptive to individual users' needs. At the same time regulators are committed to upholding this country's tradition of universal service, which is premised on good-quality basic service at affordable rates. Vermont's new telecommunications law is one of the earliest and most comprehensive responses to that challenge. The law allows representatives of all interests to participate, monitors the results, and provides a mechanism for reregulation if need be. In addition, each state agency, coordinated by the