Is Calif. Next After Ind. Phone Rate Hike?
A blast of Midwest winter air came from Indiana, where regulators increased wholesale telephone rates 33% -- and the bluster is blowing into California.
Regulators risked chilling phone competition in Indiana last week by granting the hike in rates that SBC Communications Inc., the state’s dominant carrier, can charge rivals to lease lines and equipment.
The jump means that competitors now pay more for wholesale than SBC charges its own retail customers.
AT&T; Corp., which rents lines and gear from SBC to provide local dial tone, responded Wednesday by announcing that it will stop offering two popular basic calling plans and will raise rates for those already enrolled in the plans.
“This huge increase in wholesale charges to competitive carriers is unwarranted and a devastating blow to the development of local phone competition in the state,” said Kevin Crull, senior vice president for marketing at AT&T;, the nation’s largest long-distance carrier. AT&T; said it might challenge the increase in court.
WorldCom Inc.’s MCI unit, another major competitor, said last week that Indiana’s decision to raise wholesale prices from about $12 a month to nearly $16 “will kill local phone competition just as it was starting to take hold,” leaving consumers with higher prices and fewer choices.
In California, the state Public Utilities Commission is expected to release a draft order soon on permanent wholesale rates that SBC, California’s dominant carrier, can charge rivals. Also in the works is a decision on wholesale rates used by Verizon Communications Inc., the state’s second-largest local carrier.
AT&T; spokesman H. Gordon Diamond said, “While we certainly can’t speculate on what we might do under a similar rate increase here in California, it’s clear that increasing wholesale prices will limit choices for many consumers, including seniors and low-income Californians.”
SBC, though, shot back that the notion of Indiana’s new rates forcing AT&T;’s actions is the “height of hypocrisy.”
“AT&T; is clearly playing politics today with its publicity stunt in Indiana,” SBC spokesman Michael Marker said. “The bottom line in all this is that AT&T; is paying much higher [wholesale] rates in other states and charging consumers the same prices.”
Indeed, AT&T; is in states that set wholesale rates for dial tone from as little as $12 to more than $26 a month, and it offers packages of unlimited local and long-distance calling, plus calling features, for $49 to $60 a month in each.
Diamond said the difference was that in states with lower wholesale rates, AT&T; could offer more varied plans to fit more pocketbooks. In California, for instance, about 25% of its local customers are on “lifeline” accounts, which provide basic service at a discount to poor people.
In Indiana, AT&T; said it would stop taking customers in its Call Plan Unlimited and Unlimited Plus plans, which offer basic local service and various long-distance pricing. Those now in the plans will pay $2 more a month, or $18. But AT&T; isn’t touching other plans, including its $49.95 One Rate USA plan, which offers unlimited local and long-distance service.
SBC’s Indiana customers will continue to be charged about $11.15 for basic phone service, well below the $15.76 the company says it will be charging rivals for basic dial tone.
