PUC Offers Compromise on Phone Deal
Rebuffing a proposal that Pacific Telesis Group and SBC had said might scuttle their $16.7-billion merger deal, state public utilities commissioners on Monday offered alternate plans that drastically reduce the amount of money the phone companies would be required to refund to consumers.
The new proposals indicate the commissioners are willing to compromise to smooth the way for the merger. PacTel and SBC had practically threatened to call off the deal if they were required to pay $590.5 million in refunds, which they called a “crippling penalty.”
Approval by the PUC is the last regulatory hurdle for the deal, which has already received the blessing of other state and federal agencies. The PUC will decide March 31 whether to approve the merger.
The proposal by Commissioners Josia Neeper and Richard Bilas would require the two Baby Bells to pay $213 million in rebates to consumers over five years.
A separate proposal by PUC President P. Gregory Conlon would make the companies pay a total of $316 million in rebates over eight years.
Both plans would be far less than the original refund proposed last month by a pair of PUC judges.
The new proposals require the phone companies to set aside $34 million--worth $50 million over five years--for a fund to bring new technology to underserved communities. PacTel and SBC volunteered to spend that amount to win the backing of dozens of grass-roots community groups.
The new plans in effect lay to rest the judges’ earlier proposal, which would have amounted to a monthly savings of 74 cents per customer for an average monthly bill of $31. The phone companies said that would cost $750 million with inflation.
While the new proposals are far more business-friendly, the Baby Bells emphasized that they are still opposed to paying any refunds. They said the deal would create 1,000 new jobs and hundreds of thousands of dollars of economic benefits to the state.
The new proposals “fail to recognize the full extent of benefits this merger will bring to California,” said Dick Odgers, executive vice president and general counsel for PacTel. “While it’s a step in the right direction . . . we do not believe the payment to customers is warranted.”
But consumer groups, which asked for close to $1 billion in refunds, said the new plans are a multimillion-dollar gift to the phone companies and their shareholders.
“There’s something that smells really bad about this process,” said Tom Long, a senior telecommunications analyst with TURN, The Utility Reform Network, in San Francisco. “This just puts more money into the pockets of utility shareholders, who are already going to be enriched phenomenally by the merger.”
The proposal by Neeper and Bilas also does away with some regulatory provisions that the phone companies lobbied to eliminate.
PacTel and SBC would not be required to create two new pension funds for Pacific Bell employees or to adhere to strict limits on how the combined company could spend PacBell’s profits.
Conlon’s proposal does not address those issues, but it would require the companies to notify the PUC if they plan to enter into significant deals with any of the other Baby Bells, said Jose Jimenez, Conlon’s telecommunications advisor.
