Mo. lawmakers vote to relax phone regulations

Tuesday, May 6, 2008

JEFFERSON CITY, Mo. (AP) -- Consumers in parts of rural Missouri could see their telephone rates go up as a result of legislation that essentially would end state price regulation of local phone service.

Supporters of the bill passed Monday hope it will entice phone companies to spend the money necessary to expand high-speed Internet access in rural areas.

Under current law, phone companies can escape price regulation when the Missouri Public Service Commission determines they face adequate competition in a particular geographic area.

The House gave final approval Monday to legislation that would lift price regulations statewide for a phone company whenever it faces competition for at least 55 percent of its subscribers.

That means phone companies would be free to raise rates in some areas where consumers don't yet have competitive choices.

The House's 121-26 vote sends the bill to Gov. Matt Blunt. The Senate previously passed the bill 32-1.

About 82 percent of Missouri's phone lines already are in areas deemed competitive, meaning local phone service providers can set prices as they wish, the Missouri Public Service Commission said Tuesday.

That's because competitive classifications already have been granted under existing law to areas such as St. Louis, Kansas City, Springfield, Columbia, St. Joseph, Jefferson City, Joplin and Cape Girardeau.

Based an a PSC analysis of the legislation, phone companies also would be granted competitive status throughout most of the rest of the state, relieving them of restrictions on price increases, said Natelle Dietrich, director of the PSC's utility operations division.

AT&T is Missouri's largest local phone service provider with about 1.9 million lines. The company charges around $7 for basic service in rural areas, where its prices have been regulated, but charges about double that in unregulated urban areas, said AT&T spokesman Kerry Hibbs.

Based on the legislation, those rural charges "could go up at a rather modest rate," Hibbs said.

The legislation allows rates for basic residential phone service to rise on monthly bills by $2 a year for four consecutive years. That means AT&T could raise its $7 a month rural rate to $9 the first year, and eventually to $15. But Hibbs stressed that AT&T has not made a decision on whether that will happen.

During debate Monday, some Democratic legislators warned that consumers would be harmed.

"In the short term, there's just no question rates will go up," said Rep. Jake Zimmerman, D-Olivette.

But sponsoring Rep. Ed Emery, R-Lamar, countered that over time, "this is going to be better for the consumer and better for pushing services into their rural areas."

In a free-market system, even the mere potential of competition can help hold down prices and improve customer service, resulting in more choices for telephone subscribers, Emery said.

Phone companies have suggested that, if free to set prices according to the market, they will be better able to expand high-speed Internet access into rural areas.

About 1.2 million Missourians, or 1 in 5 households, lack access to either cable modems or high-speed DSL lines, according to the study last year by the Public Service Commission. Statewide, 78 percent of households have at least some access to broadband connections. But in communities with fewer than 15,000 residents, that falls to 61 percent, the study said.

Blunt signed legislation passed last year to more easily allow traditional phone companies to provide television service. As a result, AT&T pledged last May to expand its high-speed Internet capabilities to the remaining 42 of its 213 local switching offices that were lacking it, primarily in rural Missouri.

As of Monday, the company had done so in only one of those locations, Hibbs said, but was on track to complete the improvements to the rest by the end of 2008.

Phone bill is HB1779.

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