Friday, October 26, 2007

Blumenthal The Mediator

AT&T evidentialy is not content to remain prone under the jackboot of Connecticut’s Attorney General, Richard Blumenthal.

In a month long legal battle with the company, Blumenthal ruled that AT&T no longer could provide TV service through their phone lines without registering as a cable company and promising to provide service through out the entire state, a provision that applies to cable franchises. Blumenthal, reasoning that price regulation leads to increased competition, lower rates and improved customer service, has in the past sought to force gas stations to provide unitary costs throughout the state.

The State Department of Public Utility Control, reversing an earlier ruling that AT&T’s U-verse phone line TV service was not a cable business and hence did not require a franchise license, promptly put into effect Blumenthal’s ruling. The cable companies took AT&T to court, and the court sided with Big Cable, Blumenthal and a chastened DPUC.

The DPUC’s about-face had been criticized by some friends of competition. The Cable TV Act was not intended as a regulatory straight jacket; the law permits states some room to maneuver in regulating cable companies. In its haste to satisfy Blumenthal, the DPUC overlooked a new state law that permits companies to decide the extent and nature of their markets, a novel conception that returns business decisions to the owners of businesses best able to make market decisions.

The exception, designed to prevent Big Cable from driving away new competitors, was inserted into a new law last spring because legislators wanted to encourage competition in the highly regulated cable market. Big Cable likes regulation because they can survive under the withering thumb of regulators who flog start up competitors from the market.

When AT&T threatened to withdraw U-verse should they lose in court on appeal, Blumenthal, to turn a phrase of British ex-Premier Margaret Thatcher, “went all squishy.”

Blumenthal still wishes to force AT&T to provide its service state-wide.

The attorney general offered to file a request with the DPUC to stay its decision so that AT&T may continue to sign up customers. Under such a stay, AT&T will be able to go about its business – even though the attorney general has determined it is breaking the law in doing so – but Blumenthal is keeping the firing squad at the ready in order to force AT&T to make an arrangement with Big Cable that will satisfy him.

"We want to do everything possible to find common ground,” Blumenthal said, “because there are elements of common interest here.”

In a brief statement, AT&T rejected the stay. The company is hopeful that a court can be found in Connecticut that will permit it to offer to consumers a service that might provide much needed competition in a market in which well established competitors are able to use regulations to drive new products from the market.

A stay, AT&T said, would only further confuse their customers.

Blumenthal now has inserted himself as a mediator into a competitive struggle between a host of interested parties: Big cable companies that want to use the state’s increasingly Byzantine regulatory structure to stifle competition; the bullied, confused and confusing DPUC; state legislators who carefully crafted a bill last Spring to encourage competition, now thwarted by Blumenthal; potential entrepreneurs that may be discouraged from entering a state so highly regulated; the courts, now called upon to mediate a struggle between all the parties involved; and consumers who, depending upon the outcome of the struggle, may either benefit or lose in the coming court ordered deal.

Excessive regulation is a tax on service. It almost always stifles competition, drives new solutions to old problems from the marketplace, and, in the long run, increases costs by providing a monopoly on business to companies that need not rely on innovation and cost cutting measures to survive in highly regulated markets.

No court can be expected to decide the legal issues involved in such cases by prudently considering what is best for consumers. Courts are obliged to decide cases strictly according to law. But winning a point in law is not always a guarantee that benefits will accrue to consumers. And that is why cases of this kind should be decided by legislatures rather than judges.

Someone should tell Blumenthal.

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