Audits Cite Bell Overstatements

Federal regulators on Friday released a series of controversial audits showing that the nation’s regional Bell phone companies cannot account for an estimated $5 billion in equipment--an overstatement that may have unjustly inflated phone prices for millions of customers. Pacific Bell, California’s largest phone company, was found to have $499.1 million in central office equipment, such as switches and batteries, that was “not found” and $27.7 million in “undetailed investments.” The Federal Communications Commission released the data without taking action, and the commissioners are divided over the importance and the accuracy of the results. The audit was conducted in 1997. If the audit’s findings are valid, they could prompt regulators to review pricing guidelines enacted in each state. Those price regulations are based on formulas that rely on accurate equipment inventories from the phone companies. But officials from PacBell and other local phone companies have lobbied regulators to discount the audit’s results, taking issue with the methods used and arguing that some of the equipment cited as missing was subsequently found. Rival phone companies, however, say the audits show that local phone prices have been inflated by the Bell companies.