(October 20, 2003) A recent study reveals that new cellular phone regulations proposed by the California Public Utilities Commission (CPUC) would raise wireless rates, and damage California’s economy, without providing any tangible benefits to consumers.

The economic analysis, by the Law & Economics Consulting Group (LECG), estimates the costs of the CPUC’s proposed new regulations at $1.8 billion, including initial implementation costs of $288 million and more than $700 million per year in recurring costs. Consumers would bear the brunt of these compliance costs — ranging from $4 up to $17 per customer, per month.

“Any commonsense analysis of these rules would lead to the conclusion that the proposed regulations are going to do more harm than good,” said Allan Zaremberg, California Chamber of Commerce president. “The Commission (CPUC) should conduct a detailed economic analysis before launching a risky, unpredictable, and very costly rules scheme.”

The far-reaching new rules proposed by the CPUC are detailed in a 146-page document, and would give the commission sweeping and unprecedented new authority to regulate California’s multibillion-dollar wireless communications industry.

The Chamber believes that the primary impact of the proposed rules would be to segregate California as a separate wireless market from the rest of the United States, which would yield widespread adverse consequences for consumers and service providers.

“California has a highly competitive market for cellular phone providers that has resulted in reasonable prices and good service for consumers. The CPUC’s regulatory scheme is a solution in search of a problem,” said Dominic DiMare, Chamber legislative advocate. “It is beyond the purview of the CPUC to regulate cellular phones, and the Chamber rejects the notion that additional government regulations will produce better service or lower rates for consumers.”

Additionally, the LECG study indicates that the CPUC’s rules package would result in the loss of 11,500 jobs in the wireless sector and related industries in California by raising prices and dampening the demand for wireless services in the state.

The wireless industry recently issued a “Consumer Code of Conduct” detailing commitments of service providers to their customers. The Chamber believes that it would be much better to hold the industry to these commitments, than to enact a new regulatory scheme that could have many negative consequences to the state’s economy.

The proposed regulations are currently in draft form, and would have to be approved by three of the five CPUC members in order to take effect. A vote by the commission has not been scheduled, but the Chamber has asked commissioners to reject these rules if they do come up for a vote.

Staff Contact: Dominic DiMare