17. What is the status of competition in Michigan?

As noted earlier in “Federal Statutes and Regulations,” regulation of network access and wholesale rates has largely failed to fulfill the original goal of meaningful competition in local wireline calling. Nor is there evidence that government interference is needed to nurture competition. Indeed, in response to the application by SBC to provide long-distance services, the Michigan Public Service Commission declared last year that Southeast Michigan, the state’s most populous service region, is open to competition. The Federal Communications Commission also accepted this finding.

In announcing the state commission’s conclusion, then-Chairwoman Laura Chappelle called on telecom firms to focus on products and services rather than on politicking. “Let the carriers duke it out, rather than [the commission] micromanaging rates,” Chappelle said.

Millions of Michigan consumers do, in fact, enjoy considerable choice as a result of new technologies, not regulation. As Deutsche Bank analysts observed: “The [incumbents] are facing steep declines in total access lines, caused by a sharp contraction in both primary and secondary lines, as wireless, DSL and cable/satellite platforms continue to cannibalize fixed line connections.”[33] These technologies are the least regulated in telecom.

The number of local wire lines in Michigan, for example, fell by more than 392,000 between 1999 and 2003, despite 2 percent growth in the state’s population and increased demand for fax and Internet lines. The lack of growth in wire lines can be explained by the increase in cellular subscriptions. There were 3.5 million wireless subscribers statewide in 1999, or slightly more than half the number of wire lines. By the end of 2002, wireless subscriptions had increased to nearly 4.9 million, or two-thirds the number of wire lines.

At this rate, there will be more wireless subscribers than wire lines in Michigan by the close of 2007.

Unfortunately, some rivals prefer regulatory arbitrage to “duking it out” in the marketplace. This is made all the more possible by provisions of the MTA that invite regulatory wrangling and litigation. For example, the MTA’s overly broad limitations on commercial speech encourage competitors to file frivolous complaints to the Public Service Commission about standard advertising claims by their rivals.

There is ample evidence of widespread competition in Michigan markets, yet state regulators remain wedded to the forced-access regime. For example, although officials in most other states have responded to the recent federal appeals court ruling by suspending their proceedings on forced-access rule-making, the Michigan Public Service Commission has moved ahead. On May 10, 2004, the administrative law judge assigned by the Public Service Commission to propose new standards for network access recommended no changes to Michigan’s access requirements, which are among the most onerous and costly in the nation.