For the second time in less than three years, telecommunications giant AT&T is involved in crafting major deregulation legislation at private meetings in the state Capitol. Consumer advocates, meanwhile, appear to lack a seat or voice in the process.
The situation seems similar to the role AT&T and other cable providers played leading up to the cable deregulation bill of 2008. The company had a key role in drafting that bill, then entered the cable market soon after with its U-verse package that includes digital cable.
Now, the telecommunications company is working with primary sponsor Sen. Jeff Plale, a Milwaukee Democrat, to craft a bill that will essentially bump it and other telephone utilities to a less-stringent rung of the regulatory ladder.
According to e-mails and draft copies of the telephone deregulation bill obtained from the Legislative Reference Bureau and interviews conducted by The Capital Times, a number of meetings — “too numerous to count,” according to Plale’s chief of staff, Summer Shannon-Bradley — occurred with AT&T lawyers and executives and several other key industry stakeholders.
A meeting Nov. 11 in Plale’s office included Andrew Petersen, director of external affairs and communications with TDS; William Esbeck, executive director of the Wisconsin State Telecommunications Association (WSTA); that group’s attorney, Judd Genda with the law firm Axley Brynelson; and AT&T attorney David Chorzempa. Plale is the sponsor of the Senate version of the bill and Rep. Josh Zepnick, D-Milwaukee, is the sponsor of the Assembly version. Records do not indicate whether Zepnick was in attendance at the November meeting.
E-mails and other correspondence between those at the meeting and Plale’s staff show slashes or check marks next to sections of the proposal that attorneys for AT&T and the WSTA suggested should be changed.
“It’s like lawmakers looked around and said, ‘These are the companies affected. So sit down with the drafters and make a bill,’ ” says Barry Orton, a UW-Madison telecommunications professor. “The public interest isn’t represented. How could it be? Nobody was there to represent them.”
According to campaign finance reports filed with the state Government Accountability Board, AT&T, through its political action committee and employees, contributed nearly $81,000 last year to incumbent and aspiring politicians in Wisconsin.
Sen. Plale’s office deferred questions to Shannon-Bradley when contacted Friday about the private bill-drafting meetings.
Shannon-Bradley says Plale always has been very accessible to parties who have opinions or input on legislation. She adds if everyone with varying opinions was allowed to give input prior to the designated public hearings always held on a bill, nothing would ever get done.
“It is impossible to please everyone,” she says.
In addition, Shannon-Bradley says the complex nature of the subject matter and industry-specific terms used in the deregulation bill make it helpful to have telecommunications companies involved in the process.
“Issues like this are complex and intricate,” she says. “It is better to involve them and get the wording right than to get it wrong.”
Jeff Bentoff, a spokesman for AT&T of Wisconsin, echoed her views.
“It is typical for expert parties to be involved in the process,” Bentoff says.
If approved by lawmakers, the bill would give AT&T the option to no longer be classified as a “telecommunications utility,” a designation that means AT&T and other “TU’s” would no longer be obligated to provide service to all areas of the state, would no longer have to report profits and expenses to the Public Service Commission, and would no longer have to receive rate-change approval from the PSC.
Essentially, businesses founded as landline telephone companies would no longer be regulated — as they have been for more than 100 years — as utility companies.
Bill proponents say this is needed to level the playing field with other companies that also provide cable, Internet and cell phone services but are not regulated as traditional landline telephone providers. Proponents say the move to deregulate will create more competition and better prices and options for Wisconsin consumers. Proponents also cite the fact that although the Public Service Commission will have less of a regulatory hold on traditional phone companies, the state Department of Agriculture, Trade and Consumer Protection still will maintain its consumer protection role with the industry.
Opponents argue that while technology is changing and more companies now provide more bundled services that include phone, Internet and cable, the legislation would mean consumers who are older, less affluent or in rural areas with spotty cell phone coverage will not be guaranteed service. They also argue that full regulation of an industry and the ability of consumers to file a complaint with the Department of Agriculture, Trade and Consumer Protection over poor service, for example, are drastically different levels of consumer protection.
“This bill just isn’t appropriate given the number of people that still use phone (land) lines,” says Charlie Higley, executive director of the Citizens Utility Board. “It’s great that people in many areas can use and have access to new technology. But there are still plenty of areas where cell phone use is spotty and people need (traditional) phone service.”
AT&T’s efforts to deregulate itself in Wisconsin relate to a larger step the company has recently taken at the federal level. Late last year, AT&T petitioned the Federal Communications Commission, asking that it abolish regulations that require AT&T to support and maintain landline infrastructure. If granted, the request would quicken the death of traditional landline service. It would also mean phone service would either be wireless or use VOIP, or “voice over Internet protocol,” such as the Skype service that transmits voice over the Internet.
While this change, in the short term, would simply require traditional phone customers to purchase a jack to convert their phone service from an analog to a digital signal, the regulatory implications for AT&T in Wisconsin would be much larger.
According to the telephone deregulation bill AT&T has had a hand in crafting, “voice over Internet” service would be exempt from regulation by the PSC.
“We don’t support it,” says Higley. “Unfortunately, telephone companies have had a lot of input on the legislation and organizations that represent consumers, like ours, are not involved in the process.”
Shannon-Bradley stressed that anyone had the chance to voice opinions at a public hearing Feb. 9 before the Joint Committee on Energy and Utilities. She says the bill also has been available to the public since it was first introduced in the Legislature about three weeks ago.
Yet AT&T and WSTA have been discussing the bill with Plale’s office for months.
It’s not just consumer advocates voicing concern over the meetings. At the Feb. 9 public hearing, Paul Fuglie, president of Verizon North Inc., told committee members that although AT&T and the other companies WSTA represents are key parts of the industry, he would estimate they account for less than 50 percent of the landlines in Wisconsin. Sprint, U.S. Cellular, Verizon Wireless and Centurylink also “need to be at the table.” Fuglie says he supports parts of the bill, but registered in opposition to it at the public hearing.
“There needs to be a broader base of participants to look at this,” he says.
Scott VanderSanden, president of AT&T of Wisconsin, says telecommunications is one of the “more dynamic sectors of today’s economy.” This is one reason, he says, laws need to change in Wisconsin.
VanderSanden says his company has experienced a nearly 53 percent drop in its residential landline subscribers. In 2000, AT&T had 1.4 million traditional phone subscribers. By the end of 2008, it had fewer than 675,000.
In Wisconsin, wireless phone subscribers numbered about 2.5 million in 2002, with landline customers higher at around 3.1 million. Within three years, the number of wireless and landline subscribers was nearly equal at roughly 3.2 million. Fast forward another three years, and by 2008 the number of wireless users had reached 4 million, with landline subscribers dipping to 3 million, according to the Federal Communications Commission.
“Historically, phone service was regulated along with water, sewer, heat and electric, because it was seen as essential,” Higley says. “That’s the legacy companies like AT&T have had to live under. Now, they’re trying to brush that off because of new technology. But there are many people who still need basic phone service.”
Without leveling the playing field and allowing AT&T to be treated the same as other companies that provide cable, Internet, traditional phone and cell phone service, VanderSanden says AT&T and other traditional landline providers “will continue to be at a disadvantage.”
“The time to modernize these rules has come,” VanderSanden told committee members.
The argument that deregulation creates more competition and consequently lowers prices for consumers also was made during the process to deregulate cable, but a state audit released in December suggests lower prices have not resulted from cable deregulation.
Over a two-year period ending in July 2009, costs increased, on average, 21 percent for basic cable service and 11.5 percent for expanded basic service, according to the Legislative Audit Bureau.
State Auditor Janice Mueller stressed the data should be interpreted with caution for several reasons, including variations in the number and types of channels offered by providers as well as variations in the same services provided by the same provider because of an increasingly common practice known as “bundling” of video, Internet and telephone service.
The audit findings do support the main argument of consumer advocates: that consumers who may not be interested in purchasing “bundled” services or have access to such services saw their basic service costs go up after the cable deregulation bill was approved.
AT&T argues otherwise.
“It is just common sense that competition, not monopolies, is better for consumers,” says Bentoff, the AT&T spokesman. “The audit wasn’t able to look at everything. It didn’t look at bundles and packages, and those are the most competitively priced.”
In 2007, Rich Eggleston, communications coordinator with the Wisconsin Alliance of Cities, lashed out at lawmakers for allowing AT&T and other cable providers to draft the cable deregulation bill without getting input from consumers and local municipalities.
“It proved to be a successful strategy for them last time. The governor ended up signing the bill. Why won’t they do it again?” Eggleston asks. “Since they’re back at it, it’s up to consumers and consumer advocates to make sure the little guy is represented this time.”