PUC Suggests SBC Lease Rate Increase
State regulators on Monday proposed 21% to 25% hikes in the rates rivals pay to lease telephone lines and equipment from SBC Communications Inc., a move consumer watchdogs said would kill competition and lead to higher customer bills.
The California Public Utilities Commission, under a draft by an administrative law judge, would raise the wholesale price to $16.90 for the package of lines and gear that SBC’s competitors need to provide full phone service. The current price averages $13.93 a month per line. Commissioner Carl Wood, who is overseeing the proceeding, issued an alternative proposal that would raise rates to $17.38.
Natalie Billingsley, telecom analyst for the PUC’s Office of Ratepayer Advocates, noted that SBC charges its own retail customers $10.69. Given that, she said, “it’s hard to imagine how competitors can continue to provide residential customers with real choice” if they are saddled with wholesale rates of around $17.
SBC, which has long complained that wholesale rates in California are too low, reacted coolly to the proposed increases. It had wanted the rate set at $30.33 a month per line. Nor did the proposal please AT&T; Corp. and other rivals, which sought a fee of $8.09 a month per line.
“The two proposals are well within the ranges the competitors wanted, and I don’t think realistically that the Bells thought that they could get what they wanted,” Wood said. “Both sides’ methodologies were flawed. This sort of came out in the middle.”
SBC and the other Baby Bells are compelled by federal law to lease their lines and other equipment to their rivals around the country. The aim: to foster competition in local phone-service markets, where SBC and the other Bells long enjoyed monopolies and are still the dominant providers.
Lora K. Watts, SBC California’s president, objected to the administrative law judge’s proposal. Although it would boost rates 21.3%, she said that “it is still well below the national average and woefully under the $29.92 it actually costs SBC to provide our lines to other carriers in California.”
“Unfortunately,” Watts added, “today’s decision falls short of establishing a policy that benefits consumers, encourages investment and increases jobs for California.”
Watts indicated that Wood’s proposed increase of 24.8% was a little better, though far from ideal.
Kenneth P. McNeely, president of AT&T; California, countered that the proposals would “kill local phone competition in the state and give SBC what it wants the most: its monopoly back.”
Paul Fadelli, executive director of a group called Californians for Telecommunications Choice, agreed. Fadelli, whose organization typically sides with the Bells’ rivals, decried the proposals as “yet another hand in the pockets of California consumers and small businesses that will ultimately doom local phone competition in the state.”
Fadelli pointed out that the proposals also call for even bigger percentage rate increases for SBC rivals that lease only the Bell company’s copper lines to customers’ homes and businesses. That makes it less likely the competitors will install their own equipment, he said.
Wood said he anticipated that at least one more alternative plan would be drafted, and that would raise prices even more. Consumer groups expect that alternative to come from Commissioner Susan Kennedy, who couldn’t be reached late Monday.
The two drafts are open for public comment for 30 days before commissioners can vote.
Complicating the matter, though, is uncertainty over federal phone competition rules. Those rules, part of the Telecommunications Act of 1996, provide the underpinnings for actions state regulators take on rates. A federal appeals court threw out key parts of the rules in a March 2 decision, but stayed the matter until June 15 to allow for appeals.
In the meantime, federal regulators and the Bush administration have urged Baby Bells like SBC and such rivals as AT&T; to negotiate on their own.
Those talks have sparked more battles. The Telecom Act requires leasing deals to be filed with regulators and open to public inspection. But SBC and two other Bell companies maintain that the agreements they’ve reached with rivals fall outside the scope of the law and should be kept confidential.
Late Monday, SBC accused Federal Communications Commission member Kevin J. Martin of improperly demanding a copy of a wholesale leasing contract that SBC signed recently with Talk America Holdings Inc.
According to a letter sent to all five FCC commissioners by James C. Smith, an SBC vice president for regulatory affairs, Martin called Talk America on Monday and “ordered” executives to turn over to him all proposals and other exchanges the competitor had with Bell firms over wholesale pricing.
Smith asserted that the “unilateral order” by Martin for information on a “private commercial negotiation” isn’t authorized by law or FCC rules and violated a non-disclosure agreement between Talk America and SBC.
Smith asked that the documents be returned and that they not be disseminated. Martin could not be reached for comment.
Former FCC Commissioner Harold Furchtgott-Roth called the letter “outrageous.”
“This was a clear effort to make an ad hominem attack on a senior government official,” he said, “and I think the Bush administration ought to be very concerned about the company’s conduct.”
The complaint should have been addressed to Talk America, not Martin, according to Furchtgott-Roth. “There was a very deliberate and calculated effort to insinuate Commissioner Martin into this,” he said.
It was Martin who broke from Republican ranks to join the commission’s two Democrats in voting to maintain local phone service competition rules last year. Those rules, bitterly opposed by FCC Chairman Michael K. Powell, were the ones rejected by the appeals court.
