Verizon to Texas House Regulated Industries Committee: Structure State's Proposed Telecommunications Deregulation on Wireless Phone Industry, Not on Failed Local Cable TV Model

AUSTIN, Texas -- Saying the initial draft of a state telecommunications reform bill would be a boon for local cable TV companies and a bust for telecommunications customers, Verizon's top executive in Texas urged the Legislature to "fully and unconditionally" embrace free-market competition in Texas for all telecommunications providers, not just local cable TV companies.

"This is not the time for more and/or conditional state government regulation burdening some telecom industries to the benefit of others," said Verizon Southwest Region President Steve Banta in testimony at a public hearing held yesterday by the House Regulated Industries Committee on the proposal, House Bill 789. "It's time to let Texas customers choose, not the state government, which telecommunication technologies are good for the future of Texas.

"It's time for Texas to embrace the proven model of the wireless phone industry, which, unburdened by state regulation, has delivered free-market competition, lower prices and new technological benefits to phone customers across Texas.

"There are now more wireless phone customers in Texas than wireline customers because technology, not regulation, has set telecommunications competition free," he added. "It is time to set all telecommunications free of state regulation and let our state's citizens -- rural, urban and suburban-- catch up with the rest of the world in telecommunications competition, technologies and cost savings."

Banta noted that Verizon is building a new fiber-to-the-premises (FTTP) network in four North Texas counties and wants to make broadband services more widely available in the state. But, he said, the company's ability to widely deploy these services is handcuffed by Texas' outdated telecommunications laws, most of which were drafted over 10 years ago.

He said that under HB 789's proposed legislation, phone service providers can only take advantage of deregulation if they forego participation in the Universal Service Fund (USF). The USF helps underwrite the cost of phone service in rural areas. Verizon is one of the largest rural phone service providers in Texas and operates about 1.6 million local phone lines in the state.

"The proposed legislation places Verizon in an impossible Catch-22 situation," Banta said. "Verizon and its customers want the pricing and technology benefits of wireline deregulation, but we can't abandon our USF customers, especially those in rural areas where the cost of providing wireline phone service is often 10 times the cost of providing phone service in Texas cities."

Compounding this problem is the strong customer demand for telecommunications packages that include voice, Internet and cable, he said.

Banta also expressed concern that under the current draft of HB 789, local cable TV companies would gain special advantages over other telecom providers. In addition, the bill would create a disincentive for local phone companies to invest in advanced phone services in areas where they are competing with local cable TV companies.

"Local cable TV companies have had a long-standing anti-competitive bird's nest on the ground with their near exclusive municipal cable agreements," Banta said. "Under telecom reform, phone companies and cable companies should be given parity to provide voice, Internet and cable services."

Banta also said that local cable TV's support of HB 789 was hypocritical.

"In Austin, the local cable TV lobbyists said they favor HB 789 because it supports competition; but outside of Austin, Comcast and Charter Communications are threatening cities with lawsuits if they grant cable services franchise agreements with Verizon," Banta said.

He also objected to a proposal in HB 789 calling for a Texas Public Utilities Commission study to require wireless phone companies to pay a right of way tax.

"Wireless phone companies do not use municipal right-of-ways," he said. "This is abusive taxation and has been rejected at the ballot box in California and disallowed in Illinois, where the wireless phone companies went to court to get such an unfair tax thrown out."

"Again, this is not the time for state government regulation. It is time for regulatory restraint and reflective thinking for a free-market telecommunications future for Texas," he said.

With more than $71 billion in annual revenues, Verizon Communications Inc. (NYSE:VZ) is one of the world's leading providers of communications services. Verizon has a diverse work force of more than 210,000 in four business units: Domestic Telecom serves customers based in 29 states with wireline telecommunications services, including broadband, nationwide long-distance and other services. Verizon Wireless owns and operates the nation's most reliable wireless network, serving 43.8 million voice and data customers across the United States. Information Services operates directory publishing businesses and provides electronic commerce services. International includes wireline and wireless operations and investments, primarily in the Americas and Europe. For more information, visit www.verizon.com.