Phone Firm Retreats, Blaming Lease Rates

Telscape Communications Inc. on Monday became the first phone company to pull back services in the wake of wholesale-rate increases imposed last week by the California Public Utilities Commission.

The small, Monrovia-based carrier, which targets the Latino market, said it had halted marketing efforts and would not take new customers in the Fresno area, though it would continue to serve the 5,000 customers it already has in that region.

Under Thursday’s PUC decision, companies like Telscape must pay SBC Communications Inc. an average of $16.53 a month per line to lease the full platform of lines and gear needed to provide a dial tone to customers or spend an average of $11.93 to rent the copper line alone. Those prices represent increases of 19% and 21.5%, respectively.

The rates are even higher in rural areas such as the Central Valley, where Telscape’s cost for copper lines rose about 30% to $29, said Jeff Compton, a Telscape vice president. That means the company can’t compete profitably against SBC, which can charge $10.69 for basic service, he said.

SBC spokesman John Britton said the new rates were still well below SBC’s costs as well as the national average of wholesale phone rates. He declined to comment on Telscape’s action.

Telscape serves about half of its 90,000 customers by leasing SBC’s platform and the rest through its own switches, which still connect to SBC lines.

The Telecommunications Act of 1996, which was aimed at breaking up the regional monopolies in local phone service, encourages rivals to invest in their own equipment, such as switches that allow for features like call waiting and caller ID. But competitors still need to lease the copper lines because those would be prohibitively expensive to replicate.

The PUC rate increase for the lines alone, however, discourages companies like Telscape from competing as the telecom act envisioned, Compton said.