GTE, PacBell Bid to Recover Loss Is Rejected

An administrative law judge has rejected Pacific Bell and GTE’s requests for more than $3.7 billion in compensation to help recover costs they anticipate from newly allowed competition for local service.

But one member of the California Public Utilities Commission disagreed with the reasoning behind Monday’s decision. He intends to go to bat for the two telecommunications providers when the full five-member commission meets to review the decision later this year.

Administrative law judge Barbara Hale rejected San Francisco-based Pac Bell’s request for $3.7 billion over five years and Stamford, Conn.-based GTE’s request for $500 million. The two asked for a hearing to determine the method for recovering that money from customers.

The companies argue that because the PUC imposed competition in the local phone market, they will be denied an opportunity to earn a fair rate of return on investments they made in technology. That amounts to a violation of their constitutional protection against uncompensated “takings” of property, they said.

They say they are entitled to compensation because the PUC ordered them to invest in switches and wires to maintain and improve the phone system, then turned around and denied them a chance to recoup those investments by allowing competition.

If the companies were allowed to recoup that amount in rate hikes alone, customers could see fee increases of $3 to $5 per month, according to officials with the PUC’s Division of Ratepayer Advocates.

But Hale concluded that the recently enacted federal telecommunications law preempts PUC regulation of local competition. It prohibits states from constraining entry in local markets. States must comply with federal regulations.

In a statement issued Tuesday, Lee Bauman, Pacific Bell vice president for local competition, said: “This decision is not about compensating Pacific Bell and other local phone companies for future competitive losses. It’s about fulfilling commitments already made by the state of California to Pacific Bell and others.”