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Arguments over telecom deregulation in Ky. ‘aren’t fact-based’

By   /   February 22, 2013  /   News  /   No Comments

By Mark Lisheron | Watchdog.org

CALL ME: In this photo from 1959, long-distance operator Elizabeth Keener, 18, poses with the Princess, a design by Bell Laboratories. Supporters of deregulating land line phone service in Kentucky say their opponents don’t understand that America has moved beyond the Princess to the digital age. (AP Photo/Horace Cort)

Jim Waters was beside himself.

Last March, a bill to deregulate landline phone service, flayed by a novel coalition of senior citizen and environmental groups, was left for dead when Kentucky House Speaker Greg Stumbo let it be known the bill wasn’t likely to pass in the House.

Supporters, including major telecommunications companies AT&T, Windstream and Cincinnati Bell, huddled with the bill’s author, state Sen. Paul Hornback, R-Shelbyville.

Satisfied that enough compromises had been added, Hornback filed Senate Bill 88 earlier this month.

Stumbo pronounced himself full of reservations. After all, Stumbo said, he had the interests of rural Kentucky to protect.

The statement left Waters, the president of the Bluegrass Institute – the only free-market think tank in Kentucky, he said – spluttering.

“He doesn’t get it,” Waters said. “I’m not sure any of them get it.

“You have legislators who say they’re against it who won’t even read the bill. The arguments about the bill aren’t fact-based. All we’ve gotten for the last year is emotion.”

The emotion has been stoked around a component of the deregulation that would allow AT&T, which has been bound by legal agreement as a “carrier of last resort” since 2006, to step away from its landline service in mostly rural areas of Kentucky.

Doing the stoking is AARP, the powerful lobbying group for the elderly, in partnership with the Kentucky Resources Council, one of the state’s key environmental advocacy groups, conjuring images of the elderly and poor of rural Kentucky cut off from emergency services and civilization itself.

Hornback has gone to lengths in the state media to say his new bill required at least one phone carrier to offer voice service in areas of the state where there were fewer than 5,000 individual landlines.

Opponents haven’t been in any way persuaded.

“Access to stand-alone, basic phone service is not a privilege, but is a right secured under Kentucky law,” Tom FitzGerald, director of the Kentucky Resources Council, said in a statement he issued to Watchdog.org. “Senate Bill 88 weakens consumer protection, allows AT&T, Windstream and Cincinnati Bell to substitute less reliable wireless voice service for highly reliable landline service, ends the right to stand-alone basic phone service, and lessens public safety by allowing basic landline service to be replaced by wireless service that may not support alarm systems.”

This, Waters said, is a parroting of anti-corporate rhetoric that ignores how brutally competitive phone service is in the digital age. AT&T is being forced by Kentucky law to offer less competitive service and maintain a network of underground copper wires when its competitors do not.

“It shows an utter ignorance of the free market,” Waters said. “This isn’t about taking away phone service from people. It’s coming from people who are opposed to deregulation of any kind.”

While it might seem to someone from outside of the state an unusual marriage, AARP and the Kentucky Resources Council have worked together on utility issues before. The Resources Council lists among its missions utility regulation.

In 2009, the council’s FitzGerald, acting as counsel for AARP, won a rate hike reduction of $5.4 million for 91,000 customers of Columbia Gas of Kentucky, a case decided before Attorney General Jack Conway.

FitzGerald told Watchdog.org his group took on utility issues because the state is without a true general consumer watchdog group and “in order to protect those who often bear the brunt of the impacts of deregulation.”

The Resources Council has done its sparring on modest budgets, $230,264 in 2010 and $253,454 in 2009, according to the legally required documents FitzGerald filed for the nonprofit. (You can see them here, here and here.)

During those three years, FitzGerald’s salary has increased from $85,624 through June 2009 to $107,233 through June 2010 to $114,147 through June 2011, according to the filings.

FitzGerald augmented his salary in 2008 when the liberal Heinz Family Foundation presented him with a $250,000 cash award for his environmental work.

Teresa Heinz Kerry, head of the Heinz Family Philanthropies and wife of Secretary of State John Kerry, wrote at the time that FitzGerald has “generously and tirelessly shouldered the causes of those without the resources or expertise to fend for themselves.”

Rural Kentuckians tied to landlines is just such a cause for FitzGerald.

AT&T may believe, as it told the FCC in 2009, that “plain-old telephone service” is a “relic of a bygone era,” he said, “yet basic telephone service remains a lifeline for many Kentuckians to convey medical monitoring information, smoke and security alarms, and for reliable voice service. Basic local service is more than just ‘voice’ service – it includes, by state law, reliable unlimited local exchange calling, 911 service, directory and operator assistance and the ability to connect with other carriers.”

AARP’s advocacy on behalf of a largely elderly rural market for landline service is a slightly different matter. The group is also in the cellular phone business. Consumer Cellular offers low-cost phone plans through AARP with AARP discounts.

“AARP is a self-serving player on this bill,” said Phil Kerpen, who has been following the legislation as head of American Commitment, a free market nonprofit based in Washington, D.C. “It would be in its best interest to prevent deregulation and keeping that competitors’ costs higher.

“This is America, and there’s nothing wrong with trying to make money, even with lobbying for marketplace advantages – as long as it’s clear that’s what you’re doing,” Kerpen wrote in a recent op-ed he shared with Watchdog.org. “But pretending to be a seniors group while you do it is wrong. It might have stood for something once, but now AARP is just another special interest.”

Watchdog.org contacted AARP offices in Louisville and Washington earlier this month without a response. A call to Scott Wegenast, a community outreach specialist with AARP in Louisville, was not returned.

60 Plus Association, a nonprofit group established in 1992 in Washington as an ideological counter to AARP, has thrown its support behind the deregulation bill in Kentucky.

“The idea that seniors are sitting in rocking chairs clinging to landlines that are being ripped away from them just isn’t real,” Gerard Scimeca, director of media for the group, said. “In this case, AARP is treating seniors like involuntary victims.”

At the same time, AT&T is lobbying to change the law in Kentucky. The company has asked the Federal Communications Commission to free it from responsibility in nearly half of the states for being the carrier of last resort.

In the other half of the states where deregulation has already been completed, recently in Indiana, service in urban and rural areas has been improved and innovation kick-started, Waters said.

“Chicken Little is nowhere to be found.”

Outside Kentucky, that is. For all of the concessions made in Hornback’s bill, the Kentucky House is controlled by Democrats, many of them representing rural areas.

Stumbo, a Democrat, hails from Prestonsburg, a city of about 3,300 people 190 miles from Louisville, 118 miles from Lexington and 140 miles from the state capital, Frankfort.

“I live in an area of the state where it is difficult to communicate with certain rural parts of my county via cell,” Stumbo told the Lexington Herald Leader at the time he put the death sign on the original deregulation bill. “If you eliminate landlines in their entirety, you eliminate access in case of emergencies and for elderly people who don’t have or are not accustomed to cellphones.”

Things are always changing for technology. Not so for politics.

“It should fare better with each year as people turn to cellular service and the case becomes weaker to maintain the ‘old copper loop,’ Kerpen said. “But this bill (in Kentucky) has an uphill climb.”

Contact Mark Lisheron at 512-299-2318 or [email protected].


Mark Lisheron was a former Austin-based reporter for Watchdog.org.