LEGISLATORS MULL IMPLICATIONS OF BELL BILL

Legislation that would require the Missouri Public Service Commission to exclude income from Yellow Pages advertising in determining Southwestern Bell Telephone Co. rates has passed committees in each house of the General Assembly, and could be debated during the final four weeks of the session.

Officials of Southwestern Bell contend that Yellow Pages advertising is a separate company, and its income has nothing to do with customer phone rates. They also contend that the practice is outdated, and having it as part of the rate regulation process costs customers.

But opponents of the legislation, which include all five members of the PSC, say removing Yellow Pages revenue from the rate-setting process would lead to increased customer rates. They also say that all other state PSCs have the authority to use Yellow Pages revenue in determining rates.

To most legislators, the legislation is complicated. Few have had time to consider it in a session filled with issues like workers' compensation reform, health care, and a new school foundation formula.

Rep. Larry Thomason, D-Kennett, says he's confused by the issue. He said that Southwestern Bell is acting like the concept is no big deal and quite simple. On the other hand, the opposition from the PSC has gotten legislators' attention. They are concerned about taking action that might ultimately drive up phone rates.

The language pertaining to Yellow Pages is only about three paragraphs, but the implications are hard to determine, said Thomason.

Thomason said: "It is not as simple as it sounds; it really is a complicated issue. I think

the vast majority of people here are waiting until we get into floor debate so they can learn about the issue and make up their mind.

"If what we are hearing from the phone people is true, there can be no harm to this bill, with one exception: we are taking something from the normal venue of the PSC and putting it in statutes."

Sen. Peter Kinder, R-Cape Girardeau, serves on the Commerce, Consumer Protection and Environment Committee that voted to send the measure to the full Senate several weeks ago. Kinder said the bill merited consideration on the Senate floor and he voted to pass it out of committee. However, he said he is skeptical about the legislation.

"I'm leaning against the bill, but listening to all sides," said Kinder. "I have read everything I can on it from both sides that I can find, and I just think Southwestern Bell has been losing the argument. I have had an open mind on it, and still have an open mind, but it will take some powerfully persuasive evidence to change my mind."

Explaining why the bill is needed, Craig Felzien, Bell's community relations representative in the area, contended it is not appropriate to use Yellow Pages revenue because it has been a separate company for 10 years.

"Under today's law, telephone rates are partially dependent on whether a car dealer or plumber or any other advertiser takes out an ad in the Yellow Pages, even though the Yellow Pages operations are wholly separate from our local telephone service," said Felzien.

"To set your telephone rates based in part on the revenues of a separate operation in a completely different industry is like setting a carpenter's wage scale by taking into consideration the income of a spouse, who might be a doctor or teacher. The bill would change that so that your rates would be based only on the costs and profits of the telephone company."

Felzien pointed out the bill states that no automatic rate adjustment can take effect because of the bill and that the PSC continues to have the authority to set rates.

But Linda Gardner, deputy general counsel for the PSC, said the only reason Yellow Pages is a separate company is because of the PSC's approval several years ago. Gardner said that was done because it was not viewed as essential to phone service, and the intent was not to build a case for separating Yellow Pages revenue from the rate-setting process.

She pointed out that Southwestern Bell already has a request before the PSC to separate Yellow Pages revenue from the rate process, which the commission has not yet acted upon.

"This is not a case that has been presented several times to the commission," explained Gardner. "We have had arguments over what level the pages' revenue should be included, but not whether."

Kevin Kelly, communications director for the PSC, and Gardner both explained that all states have the option of using Yellow Pages revenue in determining rates.

"The bottom line is, if this bill passes, Missouri would be the first state where the PSC is barred from using Yellow Pages for determining rates," said Kelly.

Members of the PSC also disagree with Bell Telephone officials, who say rates would not be affected.

A memo from the commissioners said: "Despite SWBT's assurances to the contrary, passage of this legislation will ultimately impact customers either through higher rates than would otherwise be necessary or through reduced or eliminated rate reductions or customer credits. Dollars cannot be removed from the rate-setting process with no effect whatsoever."

Gardner said that in 1990 and 1991, the company had a return on equity of about 16 percent each year, even after figuring in a one-time bill credit for customers.

Felzien said Southwestern Bell has not had a local rate increase since 1984.

But Gardner said that even if Southwestern Bell's assumptions are accurate that their rates would not increase as a result of the change, rates for customers of other phone companies could.

She said United Telephone has a $9 million rate-increase case pending. Unlike Southwestern Bell, it had overearnings of $150 million.

"For some companies it may cause an increase, and for other companies less of a reduction in rates than might otherwise be the case," said Gardner.

Felzien contended there is a lot of misinformation about the bill.

Said Felzien: "The truth is that this bill merely updates an outdated piece of regulation. Scare and intimidation tactics by bill opponents cannot alter the facts. This bill will eliminate a rule that in today's telecommunications industry is a regulation that is unnecessary and costly and does not benefit customers."