Speak Your Piece: Competition and Fair Play

If competition alone will ensure that rural Americans get great communications services, why were some phone companies mistreating consumers by dropping their calls – until the FCC stepped in?  For competition to work, you need a good referee. 

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Jodie Griffin of Public Knowledge and Senator Ron Johnson (R-Wisconsin) during a Senate subcommittee hearing on the role of government in ensuring quality communications services. Senator Johnson says competition alone will ensure companies deliver "excellent" service, although the FCC had to get involved before rural call completion improved.

The free market and competition alone will take care of all of rural America’s communications needs.

So says Senator Ron Johnson (R) of Wisconsin.

The facts? Well, they say otherwise.

“If you have a company that doesn’t have very good [phone] service, don’t you think customers are going to switch to another company?” Johnson asked rhetorically in a committee hearing earlier this month. “Don’t you think that competition would do a better job of guaranteeing that [service] than heavy-handed government trying to guarantee that?”

That’s great in theory, but in practice it leaves something to be desired, especially in rural areas. Without an even-handed set of rules, lots of consumer information and some good choices, real competition frequently doesn't make it to rural America.

There's no better illustration of this point than the very matter Senator Johnson was referring to — the problem of rural call completion.

For years, some phone companies that use the Internet to route their calls have been playing a game of “not it” when placing calls from metropolitan areas to customers in rural areas. Unbeknownst to consumers, these companies have handed their calls over to companies that try to route the calls to achieve the least cost. That seems reasonable. But the results have been far from it.

Some of these “least call routing” companies have faked unanswered calls, sent calls into endless loops and dropped them outright. In some cases, companies did this to avoid paying the cost of reaching rural areas, even though these same companies claimed to be treating everyone the same.

The problem got so bad that the Federal Communications Commission got involved at the request of some rural phone companies, state utilities commissions and other consumer advocates.

Earlier this month the FCC reached a $875,000 settlement with a Texas company, Matrix Telecom, for dropping calls to rural customers. In February, Windstream agreed to pay $2.5 million to settle a similar complaint. And last year another phone company, Level 3, agreed to pay nearly $1 million because of call-routing issues.

Plenty of folks – including the ranking member of the Senate Commerce, Science and Transportation Committee, John Thune (R-South Dakota) – think the FCC needs to do even more to correct this problem. They seem to disagree with Senator Johnson’s notion that competition without enforcement of the rules will make sure that rural Americans get a fair shake.

The problem of rural call completion is not over, but it's getting better. Bad actors are on notice that someone with leverage is paying attention. And there’s a very good chance the problem will continue to improve if the FCC sticks to its guns. (If you think you've got a problem with dropped calls to rural areas, you can report it to the FCC here.)

So why do we need government to get involved to help solve problems like these?

For competition to hold down prices and ensure quality service, consumers need information – they need to know what the problem is. And they need choices – they need an alternative to the company that is charging too much and providing too little. And they need companies to stay above board and play by the rules.

Obviously, in the case of dropped calls, consumers didn't know the facts because companies were hiding them. And consumers didn't have choices because we can't tell phone companies how to route our calls. And, finally, some phone companies didn't play by the rules and serve everyone, the way they are supposed to.

But government regulators finally assembled enough information to determine there is a problem and start doing something about it. It took years, and it’s a work in progress. But the improvement in service to date results from the actions of federal regulators, spurred by many private and public consumer advocates.

The rural call completion problem is a small piece of the big changes that are occurring in the U.S. communications system. The FCC’s action – which has bipartisan support – shows how a public intervention can improve the marketplace for us all. There ought to be a lesson here as we continue the transition from our old phone system to the new, Internet-based system of the future.

In the U.S., we’ve had a long-standing commitment that our communications backbone should be as accessible as possible. We shouldn’t get locked out simply because our ZIP code and bank account aren’t up to snuff.

To make a system like that work, it takes a lot of competition – and a public referee to ensure we all act fairly and follow the same rules.

Tim Marema is editor of the Daily Yonder. Reach him @dailyyonder or [email protected].

 

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