GTE Sues Over Local Phone Rate Discount Set by Pennsylvania PUC

GTE Corp. filed suit Thursday over local phone rates set by the Pennsylvania Public Utilities Commission, the first suit of its kind since the Telecommunications Act of 1996 went into effect in February and opened the nation’s $90-billion market for local phone service to competition.

State commissions throughout the country are deciding how much of a discount local phone companies such as GTE and the Baby Bells should offer to companies that want to compete for customers by reselling their services.

In Pennsylvania, the Public Utilities Commission said GTE should offer a 28.8% discount to competitors that want to resell local phone service. The Stamford, Conn.-based phone company said it should only have to give a 7% to 10% discount, based on a detailed accounting of its costs. GTE also said the commission dramatically underestimated its cost of maintaining its network.

Although each state is responsible for setting its own wholesale rates, the Federal Communications Commission has suggested that discounts be in the 17% to 25% range. In California, regulators decided that GTE’s wholesale discounts should be in the 7% to 12% range. GTE General Counsel William P. Barr said more suits could follow in other states that require high discounts.