I recently asked Chairman Klein to share her thoughts on retail competition by responding to the following questions.

Texas has a very friendly regulatory structure for new local phone entrants. We have enjoyed an increase in CLEC penetration over the last several years--growing from 4 % as of December 1999 to 16% as of December 2001. Over 500 CLECs have been certified to do business in Texas since 1996 and 254 have entered into interconnection agreements with the ILECs. However, the last three years have been a boom and bust cycle for the telecom industry nation-wide, especially for CLECs. In light of the times I would counsel two things. First, I would encourage a new LEC to focus their business strategy narrowly and grow conservatively regardless of the state in which they seek to do business. This minimizes the need to undertake more debt and gives the financial community some security in the long-term, knowing that the company is risk-averse. Second, I would advise a new CLEC to enter the market after we get some understanding from the FCC about the availability of UNEs. Capital is hard to secure today. The financial community may be more inclined to invest in new companies after the regulatory framework has been clarified. The popular UNE-P entry strategy may be smart for the short term, but a new LEC must plan to reposition itself in the market if it wants to stay the long haul.

CLECs occasionally offer anecdotal evidence that SWBT is acting in anticompetitive ways to frustrate their entry into the local market; some allegations center around winback offers by SWBT's retail arm and others relate in some way to the wholesale function that SWBT is providing. By establishing the performance remedy plan contained in the Texas 271 Agreement, this Commission endeavored to ferret out anticompetitive activity by SWBT that could arise due to its unique status as both a competitor and the wholesale provider to CLECs. On Friday, October 18, 2002, Birch Telecom filed a complaint asking the Commission to open an investigation to develop a factual record regarding "the need for a benefits of structural separation between SWBT's retail and wholesale organizations." SWBT maintains that CLECs are hindering competition by relying too heavily on the purchase of the unbundled network element platform because such CLECs are not investing in facilities.

Since January 2002, the PUC has received 558 complaints related to local and long distance customer service. I believe that the current number of complaints is probably a function of customer service training. I would like to see competitive telecom providers ensure that their customer service, and also marketing, representatives are thoroughly and frequently trained on the PUC customer protection rules. A solid knowledge base of the competitive market and customer rights and obligations will ensure that all consumers of in both markets have a positive experience when they interact with competitive providers, both in the local and long distance market . This adds greatly to the overall perception of competition and the benefits offered by the competitive telecom marketplace in addition to reaffirming the company's relationship with its customer.

Com. Perlman - September 2003 Issue of the Texas Telephone Scorecard

I met with Commissioner Perlman during his last official day in office to ask him to share some parting thoughts on the Texas telephone market.

Unlike the electric utility industry, where there is a viable framework for competition, our competitive model for telecommunications competition is broken. On the retail side, we need to create a better retail framework.

The problems here are well known: retail rates that are below cost and inhibit wholesale competition and access charges that are above cost and encourage arbitrage. We must stop the 6 year war between CLECs and ILECs. I believe that all telecom providers should all be interested in creating a level playing field: getting retail and wholesale prices right; and providing a stable wholesale model. The approach would be to address State telecommunications policy in a more comprehensive manner during the 2005 PUC Sunset review process. A comprehensive framework would need to be constructed not only to address every stakeholders’ interests but with the goal of creating a sustainable, competitive local telecommunications market and thereby lessening the need for regulatory oversight.

This approach was successfully used during the 1999 Session to create a new framework for retail electric competition, which, by most accounts, has been successfully implemented over the past three years. I described such a framework in our last report to the Legislature. It suggests deregulating retail rates, removing subsidies from access charges, and developing an agreed upon set of access to wholesale network elements. I believe this is achievable based on our success with the electric industry.

I recently asked Commissioner Parsley to share her thoughts on retail competition by responding to the following questions.

One important area that is getting a great deal of attention is the search for an appropriate balance in the telephone wholesale regulatory structure. Part of our mission is to promote competition in a way that is fair to all market participants, including consumers. As you know, the FCC is in the process of making some significant changes in federal regulations calling for the state commissions to determine which UNEs should remain available to CLECs, generally removing unbundling requirements from broadband facilities and phasing out line-sharing. Retailers will have to guide their customers through any market changes that occur as a result of these new rules in order to make the transition as painless as possible for consumers.

It is important to provide an environment in which local competition can take root in Texas, so that it can ultimately evolve into facilities-based competition throughout the state. In order to achieve that objective, local telephone providers in Texas must understand both the authority and the limitations of the PUC to police the local telephone market. We want to encourage fair competition in local phone service throughout the State, but our ability to act is sometimes constrained by state statutes as well as by federal laws and regulations. Local telephone companies, and particularly smaller companies, must become knowledgeable about this complex regulatory environment in order to provide reliable and economical services to their customers.

I believe that the focus of everything we do should be squarely on the effect it has on the customer. Phone company customer service representatives need to be constantly mindful of what they can do to avoid or quickly solve problems for their customers. A customer service representative should be an ally of each customer with a service problem. Customer service staffs should be on the lookout for trends and recurring complaints, so that issues can be addressed before they escalate into more serious problems. In order to most effectively serve their customers, service representatives need to have a solid understanding of the evolving competitive market, both local and long distance, and of telephone customer rights and obligations. Customer service organizations also need to be familiar with PUC rules and procedures, so they can avoid complaints, and so that they can work efficiently with the PUC Customer Protection Division when complaints arise.