Decision on AT&T; Price Cap Plan Postponed
The Federal Communications Commission today postponed until March a decision on a plan to change the way American Telephone & Telegraph Co.’s interstate services are priced after members of Congress requested more time to study the proposal.
“To ensure the fullest participation of all interested parties, FCC Chairman Dennis Patrick has agreed to defer today’s planned decision in the price cap docket until March,” a statement from Patrick’s office said.
“This proposal to give telephone companies positive incentives to reduce rates and spur innovations has been pending since August of 1987. The deferral to March is intended as an accommodation to members of Congress who have requested an additional opportunity to study and debate the proposal before it is voted.”
Since the early 1960s, the government has allowed the AT&T; a certain profit beyond its costs. The FCC proposed replacing this so-called rate-of-return regulation for such “dominant carriers” as AT&T; with ceilings on prices. That would include the seven regional Bell companies that AT&T; spun off in 1984.
In a statement, AT&T; said it is “disappointed and frustrated” by Patrick’s deferral.
“There is an urgency and need for action,” the company said. “A price cap decision is long overdue. Every day it is delayed, the consumer loses.”
Savings Alleged
The commission said its proposal would encourage greater efficiency and innovation and save customers $1.6 billion over four years if all the dominant companies participated. The FCC proposed last May that AT&T; be allowed to raise rates 3% less than annual inflation.
Lawmakers reacted with skepticism.
“As currently structured, the price cap scheme will permit carriers to set prices that may deviate significantly from costs,” said a report last November from the Democratic staff of the House Energy and Commerce telecommunications subcommittee.
“There is no assurance that rates would remain even with a ‘zone’ of reasonableness.”
On Jan. 19, in an attempt to allay lawmakers’ concerns, Patrick sent a letter and supporting documents to the chairman of the telecommunications panel, Rep. Edward J. Markey (D-Mass.) and to Rep. John D. Dingell (D-Mich.), chairman of the full Energy and Commerce Committee.
He assured Markey and Dingell that the price cap proposal had not been rushed through his staff and that he had recommended a number of changes in the plan, including a delay in implementing the proposal for the regional Bell companies and other local exchange carriers.
“I will recommend to my colleagues that we seek further (public) comment on a specific and detailed proposal, including proposed rules, concerning such issues,” Patrick wrote.
He said he would also recommend establishing separate price cap “baskets” for AT&T;’s business and residential customers to prevent the company from raising residential prices to finance rate reductions for businesses.
