Cable Group Says PacBell Plan Will Hike Phone Rates : Technology: Association claims in complaint to FCC that modernization effort would lead to 400% increase to customers.
California’s cable industry charges in a petition to be filed today that customers of Pacific Bell will face dramatically higher phone bills to pay for the phone company’s proposed $16-billion modernization project.
Pacific Bell denied the claims and disputed statistics advanced by the California Cable Television Assn. But the legal challenge illustrated the turmoil faced by PacBell as it maneuvers to compete in the fast-shifting telecommunications marketplace.
Tuesday, for example, PacBell bowed to the inevitability of increased competition in local service and asked the California Public Utilities Commission to establish rules for it.
Cable firms, long-distance companies and a host of new wireless communications services are all seeking to get a piece of PacBell’s $3.3-billion local service revenues, and the California Public Utilities Commission is expected to act soon to open up the closed market.
“To believe that we can stay where we are now and not see an erosion in our business, I think, is a false hope,” said Bruce Jamison, a PacBell vice president. “We need to get the rules in place so that we can compete on an even footing.”
The petition by the cable lobby--whose own turf is threatened by PacBell’s proposed expansion--asks the Federal Communications Commission to block the phone company’s plans on grounds that it is against the public interest.
“We believe if PacBell is successful in getting approval for this plan, local telephone costs will go up another 400% over what they are today,” said Alan J. Gardner, a cable association vice president.
The cable operators’ legal challenge is likely to intensify the regulatory oversight of how companies go about modernizing the ballyhooed information highway as federal and state policy-makers debate the hows and whens of more competition in the burgeoning telecommunications industry.
Pacific Bell maintains that the cost of its new network--which averages about $2,900 for each of the 5.5 million Californians it will serve by the year 2000--is so low that it needs no state regulatory approval. PacBell says it can substitute coaxial and fiber-optic cable for its existing copper wire network without raising telephone rates.
But the cable group argues that of the average $2,900 PacBell proposes to spend per home to modernize its network, the per-home expenditure for video dial tone amounted to just $136 or 5% of the total--far lower than the 30% to 40% other phone companies have allocated for video service.
“It appears that 95% of this new network is for video, but only 5% of the costs are assigned to video,” Gardner said.
Ray Bennett, PacBell’s director of broad band infrastructure policy, disputed the cable operators’ estimate of the project’s cost allocations but wouldn’t say what the correct breakdown is. He also said the phone company’s rates are still restricted by regulators.
“Our prices are capped under incentive regulation, and we can’t just raises prices to pay for this,” Bennett said. “Now we make the investments as we see appropriate and we take the risks whether they are good or bad.”
PacBell’s fate before the FCC is being closely watched by other phone companies such as NYNEX and BellSouth Corp. The telephone stampede to offer video programming is driven by the belief that movies and cable fare will be far more profitable than telephone service.
