Anderson Economic Group Work

The Michigan Telecommunication Act: Impact on Consumers

The growth of the information economy heightens the importance of high-quality telecommunication services, at competitive costs.  The federal government, and states around the country, have been encouraging innovation and lower costs by opening up previously-regulated markets to competition.

Recently, the Michigan legislature enacted the Michigan Telecommunications Act of 2000, which replaced the 1995 Telecommunications Act.  The law has the stated purpose of increasing competition, reducing regulation, and allowing consumers to make more choices.  However, the actual text of the law deviates considerably from these goals.

The law:

  • Forces certain providers to reduce their rates immediately, and establishes government-fixed prices for current services in most market segments;
  • Creates new fees and charges that can be levied on consumers by all providers;
  • Dramatically increases the role of state regulators and the state legislature in regulating services and prices, setting calling area, area code, and other boundaries, and allows the state to review the commercial speech and marketing plans of providers;
  • Prohibits providers from offering lower prices and better service to specific market segments, in an effort to increase their market share in that segment.
  • Creates numerous barriers to entry that will reduce competition in the local, local toll, and long distance markets;
  • In conjunction with the federal telecommunications act and FCC rulings, delays the onset of full competition in the long-distance market.

Because many of the bill’s provisions were not well understood when they were passed, Anderson Economic Group was commissioned to produce an independent study of the effects of the law on consumers in the state.