VI. Policy Recommendations

Most telecom law is dictated by federal statute, which complicates state-level reform efforts. The optimum reform would be elimination of the forced-access regime by Congress. However, the Michigan Legislature and the Public Service Commission can take steps now to improve the regulatory environment, particularly as the FCC devolves some authority to the states despite congressional intent.

The Federal Communications Commission has authorized states to analyze whether market conditions warrant forced access. This requires the Michigan Public Service Commission first to define what geographic area constitutes a market. It will also be necessary for the commission to gauge the level of existing competition in each defined market to determine the feasibility of offering rival local calling services. In its deliberations, the MPSC should:

  1. Adopt the definition of a “market” based on past FCC practice — the Metropolitan Statistical Area (MSA). If the Michigan Public Service Commission defines a market too narrowly or too broadly, the actual level of service choices available to consumers will be inaccurate. This would result in lax eligibility standards.

  2. Account for the robust competition in wireless, cable and satellite telephony in determing the level of market competition. The commission should not restrict its analysis of market competition to the wire line network. To do so would be to ignore the fastest-growing segments of the telecom market. This would result in unjustified subsidies, continued market distortions and economic losses.

  3. Set limits on competitors’ use of forced access. Technological innovation can radically change market conditions in a short time. Competitors who take advantage of subsidized access should be required to undergo a periodic review of eligibility. Whether they make any attempt to invest in independent facilities, as Congress intended, should be taken into account.

  4. The MPSC has announced its intention to review the below-cost rates paid to incumbents for use of their networks by competitors. In undertaking this review, the commission should:

  5. Reinstate the original timetable for review. The delay recently imposed by the commission has serious negative economic repercussions for the incumbent networks.

  6. Discard the flawed assumptions that understate the costs of operating the incumbent network. New rates must not impose a cost on incumbent service providers.

  7. Factor in the advantages that a competitor would gain by building an independent network. To analyze only the costs of constructing new facilities would be to ignore the competitive advantages of a more modern, efficient network.

  8. Lawmakers also have an important oversight role to play. The Legislature should:

  9. Closely monitor the Public Service Commission to ensure that rates and standards do not undermine the economic viability and reliability of the wire line network.

  10. The Michigan delegation to Congress should:

  11. Encourage colleagues to use their power of appropriations to force the Federal Communications Commission to follow the intent of Congress in drafting regulations.

  12. Recognize the failure of the forced-access approach, and work to end it through reform of the Telecommunications Act.