Consumers Are Winners in Phone Rate Battle

Regarding “AT&T; Challenges SBC’s Bid to Double Wholesale Phone Rates” (Oct. 23):

For ordinary Californians there’s a lot more at stake in the debate over wholesale phone rates than who’s winning the war of words between AT&T; Corp. and SBC Communications Inc.

Consumers are saving hundreds of millions of dollars each year thanks to the Public Utilities Commission’s decision to reduce wholesale rates. If wholesale rates go back up, competition will suffer, and those savings will be at risk. Those are the findings of independent research conducted recently by the Consumer Federation of America and by UC Berkeley.

SBC has a history of promising jobs and investment to secure regulatory decisions in its favor. But a monopoly that faces no competition has little incentive to invest in upgrading networks or hiring more workers to improve customer service. On the other hand, a company that has to compete to attract and keep each of its customers has every reason to make such investments.

The PUC made the right call in lowering wholesale rates. It should stand by that decision.

Michael Shames

Executive Director

Utility Consumers’

Action Network

San Diego

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The article cast the debate over local telephone competition as a battle between two phone companies. The real issue? Whether or not Californians are better off since the Public Utilities Commission appropriately lowered the rates SBC’s competitors pay it for access to the public phone network.

Californians finally have competitive alternatives to SBC for their local phone service -- and they have the PUC to thank for it.

The article asks: Do lower wholesale rates create a more robust local phone market? Mounting evidence concludes it does.

For example, the National Assn. of State Utility Consumer Advocates issued a report this year that found, “Without the ‘UNE-P’ service arrangements, entrants’ share of the residential local service market could drop by as much as 77% in some states, effectively killing any nascent local residential com- petition that presently exists, harming competition in the long-distance market, and paving the way for the eventual re-monopolization of the local and long- distance residential telephone business by the incumbent phone companies.”

UNE-P is telecom jargon for the components of the local phone network, the prices for which SBC wants to increase.

In late 2001, MCI rolled out local service in direct competition to SBC based on the expectation that the PUC would lower wholesale rates. When the PUC later did so, MCI quickly expanded its service offerings. Despite SBC’s claims to the contrary, the opportunity to compete has fostered innovation and investment by MCI and others.

As SBC watches its formerly captive customers switch to competitors, is it really any wonder that it now wants the PUC to double the rates that brought about this competition?

Laura Giadone

MCI Vice President

Commercial Accounts

Los Angeles