WASHINGTON / CATHERINE COLLINS : Baby Bells Seeking Relief From Some Regulations They Say Are Unfair

Like obstreperous 6-year-olds who want to do everything themselves, the Baby Bells have launched a lobbying campaign to get out from under the rule of the federal courts.

When American Telephone & Telegraph entered into a consent decree in 1984 that split up the Bell System, the resulting Baby Bells were placed under a number of restrictions: They were forbidden to provide long-distance service, manufacture telecommunications equipment or sell computer-based information services.

They also were placed under the jurisdiction of an unwanted father figure, U.S. District Judge Harold H. Greene, who has persisted in regulating their actions according to what some view as a too-strict interpretation of antitrust law.

For relief, the Baby Bells would like to be adopted by the Federal Communications Commission, and that requires some help from Congress. But a powerful roadblock looms--the cable industry, the television networks, Hollywood studios and newspaper publishers--all of whom are wary of these potential competitors.

Nervous about the possible anti-competitive behavior of the seven regional telephone companies and at least somewhat responsive to their opponents, Congress has been reluctant to let the Baby Bells out of the playpen, much less run free.

Rep. Edward J. Markey (D-Mass.), chairman of the House Subcommittee on Telecommunications and Finance, has held nine hearings in the past two years on the subject. A handful of bills grew out of those hearings last session, but none made it out of the House.

This year could be different. The powerful Rep. John D. Dingell (D-Mich.), chairman of the House Energy and Commerce Committee, is taking up the issue. Dingell’s views on which freedoms should be granted to the telephone companies are not clear.

“The only position he has taken is that Judge Greene is a good man in a bad place,” said a Dingell staffer. “Greene essentially is deciding matters that go to the very heart of the telecommunications industry from a very narrow antitrust ground, which is what he is supposed to do. Dingell’s view is that the proper forum for these decisions is in Congress.”

There is growing sentiment among some members of Congress that the current rules are too restrictive and that they are putting the U.S. at a disadvantage in the international marketplace.

Expressing that concern, Markey recently told a group of communications lawyers: “If our national policy objective is to ensure that we have a telecommunications infrastructure which is unsurpassed in the world and equally accessible to all Americans, then it is imperative to harness the full resources of the U.S. telecommunications industry.”

And that, to some congressmen, means releasing the Baby Bells from at least some of the restrictions under which they are chafing.

New Protection When Mortgages Are Sold

Homeowners have strong new consumer protections to safeguard their interests when the servicing of their mortgages is sold or transferred to a new company under a new provision of the Housing and Community Development Act.

The mortgage-servicing business is a $150-billion industry involving the monthly collection of principal and interest payments, the administration of escrow accounts to pay taxes and insurance premiums and record keeping. When a lender originates a loan, it may retain the rights to service the loan or it may sell it to a company specializing in that business. The sales have led to some problems.

The most common consumer complaints have been mishandling of escrow accounts and unwarranted fees for late payments.

“Any time there is a snafu when mortgage servicing is transferred, it is the borrower who is left holding the bag,” said Rep. John J. LaFalce (D-N.Y.), who sponsored the provision.

According to LaFalce, escrow accounts are most often depleted because the mortgage servicers pay taxes late and then try to pass the late penalties on to the consumers in the form of higher monthly house payments.

The new mortgage servicing provision requires lending institutions to disclose to the borrower at the time of the loan application what percentage of its loans--within a 25% range--in the past three years have had their servicing rights transferred or sold.

In addition, when mortgage servicing rights are sold or transferred, the borrower must be notified by both the old and new servicers and provided with a contact to answer questions and deal with any problems that arise.

Also included is a mandatory 60-day grace period in which late fees cannot be charged against a borrower who has inadvertently paid the wrong party. Servicers must also provide written notification of all changes in escrow accounts.

Developers Enlisting Legislators in Tax Fight

Real estate developers have found new hope in recent Congressional criticism of an Internal Revenue Service decision that developers can no longer use the projected cost of land improvements to offset profits from the sale of property.

The criticism came in a letter this month from 18 congressmen to Treasury Secretary Nicholas F. Brady.

Already suffering from soft markets and the nationwide credit crunch, developers were stunned last summer when the Internal Revenue Service announced plans to revoke what is known as Revenue Procedure 75-25, the long-established tax policy that allowed developers to include the estimated cost of future land improvements, such as roads and utility lines, in their tax basis.

Several bills were introduced in the last Congress to stop the IRS action, such as the Real Estate Fairness Act sponsored by Sens. David Pryor (D-Ark.) and Steve Symms (R-Idaho). But none of them made it into the final tax legislation.

Since 1928, the law governing the sale of subdivided land has held that estimated costs of future improvements may be included when establishing the basis of the sold property as long as the improvements are required by contract. Because the sales prices of lots reflect both the value of the land and the contractual agreement to provide certain improvements, the argument goes, a proper matching of income and expenses is achieved in this manner.

But the IRS decided that developers can no longer use the projected cost of land improvements to offset profits from the sale of their properties unless the improvements have been completed.

If the IRS action stands, the congressmen wrote, “many land developers will suffer severe cash flow problems because of this accelerated tax liability.”