Lawmakers look to ease price rules for phone companies

JEFFERSON CITY, Mo. -- Supporters of legislation easing state price regulation of phone companies say it will lead to more competition and new technology for consumers, but critics worry it will mean higher phone bills for consumers.

Currently, local phone companies in Missouri are largely regulated by the Public Service Commission, with the largest companies able to increase prices only once a year with commission approval.

Companies can ask the commission to declare a local telephone market competitive. If the commission makes that finding, the company is freed from state pricing rules, and can raise and lower rates in that area as it sees fit, basically just informing the commission of the change.

But the commission does not often declare an area competitive. Of 700 exchanges in the state, the commission has deemed just a handful competitive -- St. Louis and Kansas City for business services, Harvester and St. Charles for residential services, and Kearney, Rolla and Norborne for both business and residential customers.

The bills would make the process of being declared a competitive phone market easier and faster.

With the bill, the commission estimates, more than 130 business and more than 100 residential exchanges would be deemed competitive.

SBC Communications Inc., Sprint Corp. and CenturyTel Inc. -- the state's largest local phone service providers -- have the most to gain from the legislation, which has won initial approval in the Senate. A similar measure is pending in a House committee.

Jill Thomas, a small business owner, formed a consumer organization to push for changes in regulating phone companies. The group includes business owners, chambers of commerce, school personnel and senior citizens, among others.

"I truly believe that this bill is good for consumers. The bottom line is the ability for the incumbent telephone companies to be able to change their pricing to meet the retail market," said Thomas. "It allows them to do flexible packaging, bundling and service offerings they weren't able to do without the regulatory red tape."

However, John Coffman, head of the state Office of Public Counsel, which represents consumer interests before the commission, cautioned that if more of the state is declared competitive, companies could more freely raise rates, as well as lower them.

"The main concerns remain, that the test for competition would no longer be something that would be reviewed based on evidence regarding the quality and quantity of competition," Coffman said. "There would no longer be a judgment made on whether there was truly competition."

Under the legislation, an exchange would be declared competitive if there were two companies providing service other than the established company. Wireless companies could count for one of those companies, as could a nontraditional provider like a cable company.

However, companies that don't have their own lines and equipment but simply resell service, such as phone service over the Internet, would not automatically count.

Under a change adopted on the Senate floor, if a major company such as SBC wanted an area declared competitive because of a rival Internet service, for example, it could ask the Public Service Commission. State regulators then would consider the evidence under a more subjective standard, and have 60 days to decide.

The bill also allows companies in competitive areas to offer tailored packages of local and long-distance service to business customers.

Supporters say consumer protections are built into the legislation, including requiring the commission to review areas declared competitive every two years or when rates rise, and limiting increases for extra services such as call waiting to 5 percent a year, down from 8 percent, in noncompetitive areas.

Sponsoring Sen. David Klindt says consumers will win with the bill, because companies can react faster, offering better deals to customers -- including those considering jumping ship for a competitor.

"It allows the benefits of competition to get to the marketplace more quickly. It encourages the development and rollout of new technologies," said Klindt, R-Bethany. "The world of telecommunications is changing rapidly."

Phone bills are SB237 and HB433.