Fortnightly Magazine - June 15 1998

TWO YEARS HAVE ELAPSED SINCE CONGRESS PASSED THE Telecommunications Act of 1996 to "provide a pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans." %n1%n

Today, however, telephone deregulation has reached an impasse. Few customers enjoy competitive alternatives for local exchange service. Concentration in long-distance markets appears to be increasing.

UNIVERSAL SERVICE ATTRACTS MUCH ATTENTION these days, both in energy and telecommunications. But how do you measure success? Do regulators decide when goals are met by looking across an industry, or should management make the call company by company?

Consider the Telecommunications Act of 1996. It identifies the maintenance of affordable, or "universal," service for low-income consumers as an explicit statutory goal. In the electric industry, virtually every piece of restructuring legislation and every regulatory decision to date has included a universal service provision.

Try this: Buy wholesale power at 3.2 cents per kilowatt-hour; sell at 2.8 cents. That's the deal in Massachusetts. No wonder Enron fled, seeing no margin for profit.

In fact, when I called a friend at a power marketing company to learn more, he said his company had given up hope and was leaving the state.

Utilities can swallow this loss, he explained. They can defer the four-mill shortfall and accrue it for billing later, like a regulatory asset. The state's Department of Telecommunications and Energy allows it.

THE ENVIRONMENTAL PROTECTION AGENCY HAS PROPOSED wide-ranging regulations that will increase the cost of electricity production, particularly at the nation's lowest-cost, coal-fired generators.

Despite a doubling of electricity generation since 1970, atmospheric concentrations of sulfur dioxide and nitrogen oxide have declined. Title IV acid rain provisions of the Clean Air Act Amendments of 1990 will result in even greater reductions over the next few years. EPA has nevertheless charted a course to reduce utility emissions of these pollutants even further.