Members of the Association strongly oppose SB 2410.

The legislation gives the Public Service Commission the authority to originate, create or discard the rates for local telephone service that member-owned telephone companies, and small commercial companies, set for themselves. Eighteen years ago the North Dakota legislature recognized that degree of regulation was no longer necessary and discarded it as inappropriate.

In the intervening years, the wisdom of that decision by the North Dakota Legislature in 1983 has only been affirmed. Members of the independent telephone industry in North Dakota have become the leaders in introducing and deploying new technologies and investing in telecommunications infrastructure to better serve the needs of our State’s residents, all while maintaining among the least expensive rates for local service in North Dakota.

One of the reasons for those low rates is because we do not pay for expensive rate cases before the Public Service Commission, which are costly in terms of dollars and staff time. A rate case is a complex proceeding that involves the small telephone company hiring economists, consultants, attorneys and other specialists to prepare information for a Public Service Commission proceeding. Our members would rather spend that money on affordable rates and bringing new services to rural North Dakota.

Also, as you have noted in the Fiscal Note, the agency anticipates a cost of approximately $300,000 for additional staff if SB 2410 is adopted. Members of the Association believe that the figure is extremely conservative and the actual expense will be much higher. We base this statement on the belief that the number of full time employees (FTEs) is not sufficient to do the work contemplated by the legislation. The other alternative is to hire consultants to assist the new agency employees. The cost for those consultants will be passed on to the respective telephone companies affected by SB 2410 and, ultimately, paid by the member-owners and customers at the end of the line.

The State of North Dakota does not need to hobble these companies with further regulation. Without being mandated by the Public Service Commission, rural telephone companies are bringing 21st century technology to every corner of the State and, in the words of the Mobridge, South Dakota Tribune, "actually puts our community ahead of many of the largest cities in America." West River Telecommunications of Hazen serves the town and has those same facilities today in Beulah and Hazen. By the first of September they will be offering them in 15 more towns within their service territory.

Consolidated Telcom is providing that same high-speed, high-capacity service in Dickinson, Bowman, Hettinger and Mott right now. It will soon offer the same service in Killdeer and Richardton. Northwest Communications in Ray is also offering DSL, but is also implementing wireless high-speed internet to reach the most remote areas of its service territory where limitations in DSL technology do not allow it to reach. Virtually every independent telephone company in North Dakota is doing the same. Our commitment is to the customer, the quality of life and the economic vitality of rural North Dakotans.

I previously noted that rate cases are expensive and that no good purpose is served by adding that cost to the member-owners at the end of the line, nor does adding a extra layer of bureaucracy serve any function when the decisions regarding the operation of the company are made at the grass-roots level. Telephone cooperatives are run by the members they serve.

The members meet at exchange caucuses throughout the year and at each company’s annual meeting. Those members elect directors to represent their interests and, just like other elected officials, if the company is run poorly or if directors are not responsive to the customers or if the rates are too high, those directors are replaced. It is a powerful incentive and has worked very well during the last 18 years of regulatory forbearance.

The small commercial companies are not regulated because of their closeness to the subscribers they serve. The owners, manager and staff typically live in the same communities as the subscribers. It has traditionally been called "coffee shop" regulation. History bears out the effectiveness of this type of regulation: small commercial companies in the State have comparable rates, degree of investment and service offerings as the telephone cooperatives.

Finally, our members do not need protection from themselves. Additional regulation will not bring one new service or one more dollar of investment or any more technology or any more commitment to the economic prosperity of rural North Dakotans. It will just bring them higher costs.

The Association strongly urges a Do Not Pass recommendation.