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FCC Chief May Get to Prove His Theory : Phone Rate-Cap Proposal Is Designed to Improve Efficiency

From Associated Press

Dennis R. Patrick made a simple proposal nearly two years ago when he became chairman of the Federal Communications Commission: Let American Telephone & Telegraph earn as much profit as it can but limit the annual increases in AT&T;'s long-distance rates.

Patrick said it was time to throw out the 20-year-old regulatory philosophy that had allowed AT&T; to earn a certain percentage above its proven costs--a philosophy that Patrick maintained offered the utility no incentive to cut costs. Instead, he said, use price caps to reward efficiency and create economic incentives to lower costs. Doing so, he argued, will not only reward shareholders but also save consumers a bundle.

Congress howled and consumer groups said it would lead to unrelieved price increases.

But Patrick stood fast, fine-tuning the FCC plan to meet criticisms. And on Thursday, the commission is expected to approve implementation of the rate-cap proposal.

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Congress could still intervene and block rate caps, but Patrick said he considers the program one of his biggest accomplishments since becoming FCC chairman in April, 1987, succeeding Mark Fowler.

“I think that the rate cap proceedings . . . have been a model in terms of interaction between the commission and the Congress on an important issue of public policy,” Patrick said in an interview last week. “I think there has developed a consensus that rate-of-return regulation is flawed and that we need to have incentive regulation. . . . I think we have a formula and a process that is going to cap rates and bring them down faster than what we should anticipate under rate-of-return regulation.”

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The long-term benefits, he said, would give companies such as AT&T; and, eventually, the seven regional Bell companies, including Pacific Bell, “an incentive for the first time to reveal to the federal government how efficient they can be.”

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Patrick, a 37-year-old California attorney, acknowledged that his administration has been marked by more than one contentious issue--including abolishing the FCC’s 40-year-old Fairness Doctrine, which required broadcasters to present opposing views of controversial issues. But he maintains that strained relations with some members of Congress have improved because of his willingness to communicate with Capitol Hill.

“Relations, in fact, I think are very good between the commission and the Congress,” he claimed.

Patrick was born in Glendale on June 1, 1951. Graduated with honors from nearby Occidental College with a bachelor’s degree in political science, he went on to take a law degree in 1976 from UCLA. He then joined the politically well-connected Los Angeles law firm of Adams, Duque & Hazeltine before going to the White House personnel office with the incoming Reagan Administration in December, 1981, where he worked on personnel selection. He was named an FCC commissioner in December 1983, advancing to chairman in 1987. His term ends on June 30, 1992, but he is expected to leave the $82,500-a-year post later this year.

“I think it’s fair to say that 1992 will not see me in this position,” he conceded, but added that he has no immediate plans to leave government.

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