Tuesday, August 02, 2005

"LUS argues for limited rules" (& I argue for fairness)

The Advocate this morning published another of Kevin Blanchard's meticulously researched, carefully interpreted pieces. I recommend you read it through and only then come back here for my take if you feel the impulse. The story gives or alludes to pretty much everything you'd want to know to understand the game that's afoot at the Public Service Commission.

The first paragraph provides a succienct summary:
The Public Service Commission should limit its proposed rules for municipally run telecommunications businesses to only those regulations specifically allowed by state law, Lafayette Utilities System argued in a filing Monday.
More specifically:
Some of the restrictions included in the proposal and suggested by BellSouth and Cox amount to "additional burdens" beyond those contemplated by Act 736, LUS wrote in its filing Monday.
Those new restrictions included forbidding loans (made at market rates) from another side of the utiltiy system to prevent "cross-subsidization," backing the bonds with the full credit of the system, the PSC mandating a tax by local govt. (by not allowing it to "forgive" in lieu of taxes for a new venture), and limiting the geographic reach to the region in which the business was first chartered.

If the rhetorical purpose of the law were taken seriously these would all be non-starters. They start from a place that is already more restrictive than any business would tolerate. They attempt to tilt the playing field against LUS so much that the "playing field" is rotated up to become a wall preventing entry.

That was NOT the idea.

Let's take it slow; one issue of "fairness" at a time.

Are private businesses allowed to:

  • cross-subsidize their operations and make in-company market-rate loans? Yes. They can subsidize any startup they choose in any way they choose...even to the extent of taking profits made possible by their monopoly status to enter and dominate a new business category. Witness the cell phone industry where the Baby Bells bought their way into ownership of the industry.
  • back bonds with the full credit of their business? Yes. Of course. If they couldn't put their business on the line no rational bank would ever give them credit. Its called collatoral, and using it is necessary. Try suggesting a law that a private business ought to give up its history of success and the resources it has ammassed through the years in order to be "more fair" to some startup without that history. NO legislature would consider it because it would be unfair and because it would quash innovation and change. It would do the same here.
  • take tax-forgivness by a local government? Are you kidding? Yes. Asking for and getting tax forgiveness that beggars the schools and the general fund is practically required. Surely you didn't miss the massive subsidies demanded and given to Cingular when they came to Lafayette? To add insult to injury part of the package Cingular got was below-rate electricity deal from LUS and the free provision of expensive infrastructure to get that electricity to them. (LUS is subsidizing Cingular. Do you suppose BellSouth and Cox would look the other way if LUS would give the same deal to its new Telecom Division? In the name of fairness.)
  • do business outside the region in which it first achieved success? What's wrong with you? Yes. Expansion is practically the definition of success. Grow or die. No private business would contemplate allowing the state to limit them in this way. What they'd say, with considerable justification, that all such a rule would accomplish would be to protect inefficient businesses from competition and drive up the price for the consumer. And that is exactly the case in this instance. Only BellSouth and Cox are the ineffective businesses who refuse to meet the needs of their customers and are about to lose in a head-to-head competition with a nimble, local, technically-advanced competitor. (Notice that the incumbents, again, are showing a real fear of competition. If they can't kill it here they at least don't want it to spread.)
No, this is not about fair competition, a point made insistently on these pages. It is about unfair competiton. The PSC should not let itself be made the agent of BellSouth and Cox in their attempt to force higher prices on the people of Lafayette and this state. The people have made their position crystal clear on the issue of competition. The PSC should not help quash competition, innovation, and the provision of advanced services. That is not their mandate.

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