State House Approves Telephone Deregulation and Beer Bills

House Budget Chairman Rick Rand (D-Bedford) reasons that deregulation of the telecommunications industry in Kentucky will bolster business investment and create more jobs in the commonwealth.

Rand’s House Bill 152 is nicknamed the AT&T Bill for the intense lobbying efforts by that company on behalf of the legislation. The measure would end the obligation of major phone carriers – AT&T, Windstream, and Cincinnati Bell – to provide basic service in larger cities or areas with more than 15,000 households. Those who live in smaller communities could elect to keep their existing landline service.

“It, in effect, puts customers in charge in rural areas where basic service is already available,” Rand said of his bill. “The customer can choose to transition to new technology or they can keep their basic service. In urban areas, the customers can choose from multiple providers to receive voice service.”

Rand said the legislation has evolved over the three years that it’s been proposed. He offered a floor amendment that would give rural customers who opt to try alternative phone services 60 days to revert back to their landline service. Rand’s amendment was approved by voice vote.

Questions About Service and Safety

Critics of HB 152 fear it will hurt those who most depend on landline service, and that it will strip phone-related consumer protections from state Public Service Commission authority. Rep. Larry Clark (D-Louisville), who adamantly opposes deregulation, told lawmakers that HB 152 is based on the unproven assumption that competition is robust enough in urban areas to negate the need for the PSC to have jurisdiction over voice service.

The Jefferson County Democrat said the bill will result in customers in Kentucky’s biggest cities and towns losing their ability regulate any conditions of their phone service. Clark also expressed concern about 911 calls made by cell phone.

“When you call on a cell phone, [first responders] don’t get your name and address or phone number,” Clark says. “When you call on a landline, they get that for quicker response. So I think we need to protect that, especially in our rural areas where we have a lot of down areas [in cell service].”

Clark proposed an amendment to guarantee that the 11,000-landline customers currently in Kentucky could keep their service. His proposal was defeated on roll call vote of 28 – 59.

Reliable Phone Service for Rural Customers

Freshman Rep. Chris Harris (D-Forest Hills) said he doesn’t blame the telecom companies for wanting deregulation. They have to answer to the interests of their shareholders, Harris said, but lawmakers considering this bill have to protect the interests of Kentucky consumers. He said he worries that individuals who live in his rural eastern Kentucky district won’t have access to new telecommunications technologies.

“If you live in Lexington or Louisville or northern Kentucky, what’s known as the Golden Triangle, you’re not going to have to worry about access to this technology because it’s going to be there. It makes good business sense for it to be there,” Harris said. “But when you live at the head of a holler in Pike County or Martin County, or end of gravel farm road in western Kentucky, it doesn’t make such good business sense.”

Harris argued the existing regulations were enacted to help ensure that people at the far ends of service areas would have access the same quality of service and diversity of products as urban customers.

Fellow eastern Kentucky Rep. Hubert Collins (D- Wittensville) echoed the concern that the telecom giants have not made a firm promise to expand broadband service in rural Kentucky. He also worried the measure would force rural customers to switch to a less reliable wireless or Internet-based systems that could drop emergency calls.

“Many, many times, I’ve been in Martin County and could not get service on my cellphone. In Johnson County [there are] areas [where] I can’t get service on cell phone,” Collins said. “What are these people going to do? They can’t get out to communicate with their people.”

Colllins said the Public Service Commission is vital to providing consumer protections. He warned that telecommunications companies may renege on their service promises if they’re no longer regulated by the PSC.

Hopes for Better Service in Rural Areas

Not everyone agreed that deregulation would hurt smaller communities. Rep. Thomas McKee (D-Cynthiana) said he spoke with an AT&T representative about a hamlet in his district that lacks adequate cell phone coverage.

“My understanding is if we do pass this bill, that Berry, Kentucky, is going to receive cell service,” McKee said. “It’s looks like rural Kentucky is going to receive a lot of benefit from cell service improvement, broadband, and the various things that we’re looking for in the modern world.”

The House approved the so-called AT&T Bill on a 71 – 25 vote. Gov. Steve Beshear applauded the passage and urged the Senate to move swiftly on the legislation. Beshear said HB 152 “strikes a right balance between providing consumer protection and creating economic development opportunities that result from robust broadband accessibility in communities all across the Commonwealth.”

A companion measure, Senate Bill 3 sponsored by Sen. Paul Hornback (R-Shelbyville), has so far languished in the upper chamber.

Beer Distribution Bill

The House tackled another high profile issue yesterday with what’s been dubbed the Beer Bill.

House Speaker Greg Stumbo called his House Bill 168 a “re-regulation” measure. Under Kentucky’s three-tier system to separate liquor production, distribution, and retail sales, beer makers in the commonwealth must use a distributor to sell their products to retailers. But a loophole in the current law allows out-of-state beer makers to open their own distribution centers in Kentucky and cut out the middleman. The issue arose after local microbreweries complained that St. Louis-based Anheuser-Busch held beer distributorships in Louisville and Owensboro.

Stumbo said HB 168 would even the playing field by requiring beer brewers to abide by the separation rules that now apply to wine and spirits. He challenged the notion that requiring Anheuser-Busch to give up its licenses would result in job losses.

“Whoever buys these assets from Anheuser-Busch would want continuity in their business,” Stumbo argued, “so that the beer can be delivered to the retailers, so that the product can be placed on the shelves, and so that sales would not be disrupted.”

Rep. Adam Koenig (R-Erlanger) offered a proposal to grandfather in the beer distribution franchises owned by Anheuser-Bush.

“I cannot in good conscience vote for a bill that requires Anheuser-Busch to divest themselves of their holdings of two distributorships, one that they’ve owned since 1978, and as best I can tell, Louisville is none the worse for it.” Koenig said. “I think it sends a bad message to businesses who want to invest in this state… and I think many of you agree that taking away someone’s business such as this is really not our role as a legislature.”

Speaker Stumbo waged a convincing counter-argument to Koenig’s proposal and the chamber narrowly defeated the amendment, 43 – 45. Another idea presented by Rep. David Floyd (R-Bardstown) to let Kentucky-based breweries and microbreweries distribute their own beer was also rejected.

That allowed an unfettered HB 177 to pass the House on a vote of 67 – 31.

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