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Critics battle US West deregulation bill

Consumer groups and competitive local phone carriers battle against a proposed New Mexico law that would free US West from much of the state's phone regulations.

A battle is raging in New Mexico over a proposed law that would free US West from much of the state's regulatory rules, a move which critics say may dramatically undermine telephone and data competition.

The bill, which is now awaiting Gov. Gary Johnson's signature, has produced an avalanche of criticism from competitors, ISPs, consumer groups, and political figures including the state attorney general and Federal Communications Commission member Gloria Tristani, who is a New Mexico resident.

Critics say that although the bill would cap consumer fees and cut some business costs, it would allow US West to protect its near-monopoly for local voice and data service.

Passed last week by the state legislature, the bill would eliminate state ceilings on the telco's earnings and remove regulators' oversight of telephone and high-speed data rates, as well as access fees charged to competing telephone companies.

In return, US West has promised to cap consumer phone rates--which are already close to the highest in the nation--for 10 years, and invest $40 million in the state's telecommunications infrastructure.

"This law would make it impossible for us and other new entrants to really move forward," said Bill Levis, MCI WorldCom's director of public policy for the region. "There isn't any real competition yet. It is premature to deregulate when they still have a monopoly."

Competitors have made small inroads into the local phone service market in that state, but primarily in the business market. US West still controls 97 percent of New Mexico's local access lines.

Nevertheless, US West argues that the bill is necessary to allow the company to compete in-state against larger rivals like AT&T and MCI WorldCom. Those companies, the telco claims, have focused on signing up lucrative business customers for local service and largely avoided consumers in rural and other hard-to-reach areas, which are more expensive to service.

The company helped introduce the controversial bill last fall, and helped shepherd it though the state's legislature this year. Similar deregulatory measures are also pending in several other states across the company's territory, including Oregon, Washington, and Minnesota.

Although the New Mexico bill goes farther than most deregulatory efforts, analysts say the move is simply another tactic in a long history of Baby Bell efforts to wrestle free of regulatory restraints.

"US West has always been a very politically active company," said Lee Selwyn, president of Economics and Technology, a telecommunications policy consulting firm. "This is a part of a pattern of behavior that dates back probably to the 1970s, and at least to the 1980s."

At both the federal level and in state legislatures, Bell companies have sought broad deregulatory measures, while taking "baby steps" in opening their markets to local competition, Selwyn said.

"[The Bells] have been playing this game really close to the vest," Selwyn said, noting that three years after the passage of the 1996 Telecommunications Act, no Bell company has yet been allowed to enter the long distance markets. "They make many movement, a millimeter at a time, hoping that someone will eventually let them in."

Although US West has successfully won the first stage of the battle in New Mexico, the governors' signature on the bill looks increasingly unlikely.

In a speech to a business group yesterday, Johnson said he has not yet decided which way to go on the measure, but was leaning toward a veto. Much of the feedback from advisors has stressed the bill's anti-competitive effects, he noted.

Even if the bill is signed, it's not entirely out of the woods. The Association for Local Telecommunications Services, which represents new local phone companies, said it would likely appeal to the FCC if the measure is made law.

"There's enough bad things in this bill that we would have to consider filing a challenge at the FCC," said John Windhausen, president of the Association.

Governor Johnson said he would make his decision on the measure before April 9.