Arizona Consumer Choice and Fair Competition Telecommunications, Proposition 108 (2000)
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|Consumer Choice and Fair Competition Telecommunications|
Text of measure
The language that appeared on the ballot:
(summary from Arizona Legislative Council) The Arizona Constitution gives the Corporation Commission the authority to prescribe all local telephone service rates, charges and classifications. In practice, the Corporation Commission sets the rates and charges for incumbent providers through a formal process, and regulates the rates and charges of new local telephone companies through a less formal process. Proposition 108 would amend the Arizona Constitution to allow all companies that provide local telephone service to set their own rates, charges and classifications for local telephone service in any city, community or other area in this state if the Corporation Commission determines that local telephone service is available from two or more companies to a majority of the residential or business consumers within that specific area. This proposition does not apply to long distance telephone service or to access and interconnection charges paid by one telecommunications company to another. If an area is served by two or more companies that provide local telephone service but a consumer has access to only one company, that company would be required to offer the consumer the same rates for comparable local telephone and other telecommunications services offered by that company to other consumers in the area, and the Corporation Commission would be required to establish a "simplified and expedited" process to allow consumers to enforce their rights to those comparable rates.
In areas of the state where only one telephone company is offering local service, the Corporation Commission would continue to set rates, charges and classifications. Proposition 108 would amend the Arizona Constitution to change the methodology used by the Corporation Commission in setting local telephone rates. Currently, the Arizona Constitution requires the Corporation Commission to use the "fair value" method in setting a utility's rate base. (The rate base is the value of the facilities and other assets needed to supply utility service to the consumer. The "fair value" method involves adjusting the original cost of the plant and additions upward to recognize increased costs in constructing utility plant facilities.) A utility's rate base is then used by the Corporation Commission to set end-user rates. This proposition would delete the constitutional requirement that the Corporation Commission use only the "fair value" method for telephone and telecommunications services and would allow the Corporation Commission to use fair value, rate caps and other rate making methodologies in setting those rates, charges and classifications for those services. In setting rates, charges and classifications under this proposition, the Corporation Commission could consider only the costs arising and revenues derived from telephone and telecommunications services provided in areas where rates are regulated, not areas where rates are deregulated.
Under this proposition, each telephone company that provides local service would submit an annual report to the Corporation Commission specifying the areas in this state in which the company is offering local telephone service to residential or business consumers, or both. Companies could then submit petitions to the Corporation Commission requesting that their own rates in areas served by competing companies be deregulated and determined by competition, rather than being set by the Corporation Commission. The Corporation Commission would have to deregulate local telephone rates in an area where it determines that a majority of consumers are being offered service from two or more companies. The Corporation Commission would be authorized to deny any petition if it decides that local telephone service is not generally available from competing companies. If the Corporation Commission did not act on the petition within 60 days of filing, the area would be treated as if competitive services were generally available and rates would be deregulated in that area. The Corporation Commission's determinations on deregulating rates in an area would be made separately for residential and business consumers. All determinations would be subject to review in court.
Fiscal Impact Summary: Proposition 108 would amend the Arizona Constitution to allow telephone companies that provide local service to set their own rates and charges in areas of the state where competition exists. It is not possible to determine in advance the impact of the Proposition on Arizona's economy and on state government tax revenues. As a general practice, deregulation of an industry leads to more competition and lower prices than in the previously regulated market. Moreover, increased competition is often associated with additional business spending and employment growth, which in turn tend to raise the general level of economic activity and state tax revenues.
In this particular circumstance, however, we cannot accurately predict the extent to which the telephone industry would become deregulated under the Proposition. Once the magnitude of deregulation becomes known, the fiscal impact will become easier to determine.
Finally, subsequent to deregulation, the responsibilities of the Corporation Commission and another state agency, the Residential Utility Consumer Office (RUCO), relative to rate setting should decline, and their budgets will need to be evaluated at that time.