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PUC Phone Regulations

November 22, 1988

As the commissioner assigned to telecommunications matters now before the Public Utilities Commission, and its representative at the recent legislative hearing, I am compelled to respond to Assemblywoman Gwen Moore's column on recent developments in telecommunications regulation in California ("PUC's Phone Scheme Is a Wrong Number," Op-Ed Page, Nov. 14).

New technology and growing competition in telecommunications have led to numerous regulatory changes in the past 10 years. As monopolies have been eroded in various segments of the industry, federal and state regulators have relaxed regulation and offered the telecommunications industry greater flexibility. The factual result has been more options for consumers at a lower cost.

To the extent local telephone companies lose money in newly competitive businesses, California's current system of regulation says that ratepayers must make up the losses. In addition, our system can create an incentive for telephone companies to cross-subsidize these businesses, leading to further complaints from competing firms and from ratepayers who shoulder the burden. Finally, the current regulatory policy uses a "cost-plus" approach to set rates, which reimburses the utility for its costs and thus robs telephone companies of incentives to be more efficient.

Like regulators in many other states and at the federal level, we think it is time to consider alternatives that might better protect ratepayers and keep jobs and maintain economic growth in California. In short, the industry is changing dramatically and it is our responsibility to consider how regulation may need to change with it. Our objective, however, is increased flexibility and accountability, not deregulation.

We are continuing a process that began in September, 1987, with a formal hearing and will not conclude until well into 1989 or perhaps later, with full implementation. Furthermore, a wide range of utilities, large and small consumer groups, members of the public and our own ratepayer advocacy staff are appearing before us with reams of analysis and information assembled by many of the nation's foremost experts. Our process is completely open and deliberative, and will include hearings and workshops all over the state.

We are doing our job; the hundreds of millions of dollars we have been returning to consumers in rate cuts speak for themselves.


PUC Commissioner

San Francisco

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