Telephone firms push for end of price rules

Monday, February 16, 2004

JEFFERSON CITY, Mo. -- With cell phone towers sprouting across Missouri's hills and plains, it's now possible for customers to disconnect their traditional, wire-based telephones and rely entirely on cell phones.

In some parts of the state, customers can even get phone service over their cable television connections. And coming soon could be a telephone-like voice service over the Internet.

With so many choices, Missouri's old monopolistic telephone companies are making a new push to be freed from state price regulations.

Bills pending in House and Senate committees would create a new, easier-to-reach standard for price deregulation.

The result could be higher residential phone rates, but also expanded access to a type of broadband Internet service known as DSL, or "digital subscriber line."

The legislation primarily would benefit the state's three largest local phone service providers -- SBC, CenturyTel and Sprint -- which together serve 3 million of the 3.3 million telephone lines in the state.

'Effective competition'

All three currently are subject to partial price regulation by the state Public Service Commission. Because they have at least one wireline competitor operating somewhere in their territories, the big phone companies are allowed to lower their local rates as they wish. However, they can raise their rates only once a year after meeting certain criteria and gaining PSC approval.

Current law provides for the big companies to be free of all price restrictions only if there is "effective competition" in a specific market. The PSC determines whether such competition exists based on whether any of Missouri's 84 alternative local phone companies are providing comparable rates, terms and conditions of service.

The competitive label has proved difficult to obtain.

So far, the PSC has declared competition in just five residential markets (Harvester, Kearney, Norborne, Rolla and St. Charles) and five business phone markets (Kansas City, Kearney, Norborne, Rolla and St. Louis).

The legislation would take discretion away from the PSC by establishing new criteria for classifying a local phone market as "competitive" and freeing the incumbent phone company from price regulations.

First, the old monopoly phone company must update its central offices in a particular market to provide broadband Internet service. Second, there must at least two rival telecommunications companies serving the area. Unlike current law, the legislation specifically counts wireless phone companies as competitors.

Because almost all of Missouri now is covered by at least two wireless providers, the second prong of the test could be a cinch, leaving the only real challenge as broadband service.

SBC, which serves seven out of every 10 phone lines in Missouri, already has broadband capabilities in territories covering 63 percent of its customers, said spokeswoman Emily MacDonald.

Not every customer

Consumer advocates note the bill would not require broadband service to be available to every customer, just to those near a central office, which is capable of serving about a 3-mile radius. They also claim the definition of competing "telecommunications companies" could be interpreted so broadly as to include long-distance service or prepaid phone card providers.

"It sets the bar so low as to what constitutes competition that, if this legislation passed, it would essentially deregulate the telephone rates in every exchange in the state," said Missouri Public Counsel John Coffman, the state's official utility consumer advocate. That "would significantly reduce the ability of the PSC to protect rate payers from unreasonable and arbitrary rate increases."

Sponsoring Sen. Chuck Gross, R-St. Charles, said his intent is "to move toward a more deregulated environment" -- which he views as fair rather than dangerous. Gross is among those who have dropped their traditional wire-based phone service; he gets his calls through the TV cables of Charter Communications.

Cindy Brinkley, president of SBC's operations in Missouri, said lawmakers should consider at least two things -- the bill's incentive to expand high-speed Internet service throughout the state, and the potential job losses in Missouri's $10 billion wireline telephone industry if it cannot match the pricing flexibility of its new high-tech competitors.

She dismisses concerns that SBC would take advantage of the relaxed price regulations by gouging residential phone customers to make up for discounts offered to businesses.

"Competition is the absolute best guarantee in terms of affordable prices and continued good service," Brinkley said.

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