HB266.DOC

SECTION 1. The legislature finds that competition in the telecommunications market is robust. Consumers have many choices when deciding how to communicate: traditional land-line telephony, voice over internet-protocol, and wireless phone service.

The legislature further finds that advances in voice over internet-protocol and wireless phone services make these technologies viable substitutes for traditional land-line, or switched access, telephony. These services currently provide 9‑1‑1 capability, number portability, reliable service, and extensive network coverage. Even though some federal and state regulators feel these new technologies, especially wireless phone service, can never replace the traditional land-line phone for casual and emergency communication needs, many consumers do not share this same view. According to the Federal Communications Commission, the number of switched access lines of Hawaii's incumbent local exchange carrier decreased from 735,459 in 2001 to only 541,030 in 2007. The number of wireless subscribers in Hawaii, however, increased from 595,721 to 1,096,181 over the same period. While some consumers subscribing to wireless phone service maintain their land-line or wired phone service, other consumers are subscribing to wireless service as a true alternative and thus are disconnecting their land-line service. Hawaii is not unique; this telecommunication market trend is similar across the United States.

The legislature further finds that competitive local exchange carriers, currently enjoying a non-competitive switched access market, should adapt to the changing telecommunications market. When the 1996 Communications Act opened up competition in the telecommunications market, it forced incumbent local exchange carriers to wholesale their services to competitive local exchange carriers so that they (the competitive local exchange carriers) in turn, could re-sell them to consumers. The Act was designed to open up competition by allowing other carriers into the market, in hopes that they would eventually develop their own networks. After twelve years of competition, competitive local exchange carriers are still heavily reliant upon the incumbent local exchange carriers for wholesale services. This regulatory scheme has impeded growth of the incumbent carriers, as competition from other telecommunication and information services eroded market share and revenue. Thus, highly regulated switched access services will continue to saddle incumbent local exchange carriers from competing with other services, while competitive local exchange carriers continue to rely on the re-sale of the incumbents network services.

The legislature further finds that competition in Hawaii's telecommunications market is not a level playing field; the incumbent local exchange carrier is highly regulated, while other telecommunications service providers do not share the same level of regulation. Although the incumbent local exchange carrier continues to maintain the majority of switched access lines, this dominance of market share does not take into account the meteoric rise of wireless subscribers and voice over internet-protocol service. In order to determine competition in a modern telecommunications market, all types of services need to be evaluated for their effects in the marketplace. It will also force competitive local exchange carriers to adapt their strategies in a competitive environment.

The purpose of this Act is to require the public utilities commission to consider other telecommunications services in respect to switched access service when determining the competition in the switched access market.

SECTION 2. Chapter 269, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§269- Competition in switched access markets; consideration of other telecommunications and information services. When determining the competition in the switched access market, the public utilities commission shall consider other telecommunications and information services, such as voice over internet-protocol and wireless services. In addition to the classification of services factors, the commission shall also make the determination based on consumer spending, consumer demand, ratio of a particular telecommunications service to each individual, market trends, and consumer value--the comparison of the cost each service with the features provided by that service."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	266
TWENTY-FIFTH LEGISLATURE, 2009
STATE OF HAWAII