Battle over telephone regulations draws in Illinois lawmakers

SPRINGFIELD, Ill. -- For the third time in five years, state lawmakers find themselves in a complex, big-money fray over how much Illinois should regulate telephone service for millions of residents.

Telephone giants SBC Communications Inc. and Verizon Communications Inc. once again hope to strengthen their grip on the profitable local phone market through less regulation. Consumer advocates and smaller competitors want legislators to block that attempt and preserve other service options for consumers.

The outcome will determine how much consumers pay for basic service and extras such as caller ID, and whether quality of service changes.

With just six weeks left before they're supposed to go home for the summer, lawmakers are feeling pressure to weigh in. But how they'll do it is a big unknown.

"It seems like people are pretty much divided," said Rep. Jim Brosnahan, D-Evergreen Park. "There's definitely no consensus, not just among the Democrats and Republicans."

Competition and technological advancements are at the heart of the recurring debate over state government's role in regulating service. People can now get telephone service through cellular networks, cable companies, even the Internet.

In 2001, SBC and Verizon made a strong bid to scale back state regulation of their prices and services, but lawmakers refused. Instead, legislators gave regulators the authority to levy huge fines for service problems and ordered the companies to open their networks of telephone lines to competitors at lower prices.

Two years ago, though, SBC and Verizon struck back. They successfully ushered through legislation letting them charge competitors much higher prices for access to their phone networks. A federal judge threw out the measure as violating federal law.

Now, with the 2001 telecommunications law expiring this summer, legislators find themselves facing another dilemma with vastly different potential solutions.

Playing politics

The industry is ramping up its political activity, with campaign donations by telecommunications groups up by 47 percent since 1999 to 2000, according to the Illinois Campaign for Political Reform. The industry donated $2.1 million just in the 2003-2004 election cycle.

What SBC and Verizon want is the freedom to set their own local phone rates according to what the marketplace will bear. They argue that growing competition means it's no longer necessary for the state to regulate prices.

SBC points to a new wave of competition and consumer options through cell phones and phone service over high-speed cable and Internet lines -- competition that isn't regulated like SBC is. For example, SBC says wireless lines now outnumber regular phone lines and the company lost 1.6 million lines between 2000 and 2004 while consumers went with 6 million new wireless, cable, Internet and other phone lines.

"We don't have the pricing flexibility now that we need to meet the competition and to offer consumers in Illinois more competitive options," SBC Illinois president Carrie Hightman said.

The company has responded with legislation sponsored by Sen. James Clayborne, a Belleville Democrat who chairs the Senate committee overseeing telecommunications. He says the goal is to allow competition in high-end services while guaranteeing that Illinoisans can get basic phone services at capped prices if they want.

On the other side are consumer advocates, labor unions and small- and medium-sized competitors who fear deregulating the large companies will push others out of business for good and squash customer options.

They acknowledge cell phones, cable and Internet have created some new competition, but it's not nearly enough to offer residents reliable choices. Removing regulation will produce higher costs for consumers and take away strong disciplinary authority that now encourages companies to provide good service.

"This bill endangers not just consumers on the rate front, but service quality as well," said Martin Cohen, executive director of the Citizens Utility Board.

They say the best option might be for lawmakers to extend the current law for a year or two and more fully examine the issue. But some legislators say that could be dangerous.

"With the way the technology advancements are taking place, I'm not sure you can continue to wait like that," said Rep. Jim Meyer, R-Bolingbrook. "I think you need to really understand what you're doing today and make a decision."

Another option is for legislators to reject deregulation of phone service and instead begin regulating Internet and cable phone services. But some opponents say that could violate federal law, and others have philosophical objections.

"Adding regulation is not going to be a policy that Republicans are going to advocate," said Sen. Dave Sullivan, R-Park Ridge. "I don't think that's the path we go down."

While the Senate focuses on Clayborne's legislation, the House, which has held weeks of hearings on every aspect of the industry, is likely to look more skeptically at SBC's proposal.

"I don't think there's any pressure on the House that we have to pass the bill the way it is," Brosnahan said. "I think we're going to take our time with this bill and make changes if we think changes have to be made to it."

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The bill is SB1700.

On the Net: http://www.legis.ilga.gov