Bell Open to Anthony Long-Distance Idea, Commissioner Offers Regulatory Break

by D.R. Stewart

The Tulsa World - September 22, 1999

In an effort to jump-start local telephone competition in the state, Oklahoma Corporation Commission Chairman Bob Anthony proposed Tuesday that Southwestern Bell offer a series of discounts to competitors in return for the commission abandoning traditional rate-of-return regulation of the company. 

A spokeswoman for Southwestern Bell Telephone Co. said Anthony's proposal was encouraging at first glance. 

The plan would establish a five-year period in which Bell's lease rates for use of its switches by competitors would be lowered. The proposal also would significantly increase the discount in the wholesale rate that Bell charges other telephone companies to resell its products. The current discount of 19.8 percent would be increased to 32 percent to attract local phone competition, after which it would be set at 21.78 percent. 

"I come from the business world, and I have faith in the market system," Anthony said. "Traditional rate-of-return regulation has proven to be a costly, lengthy process. It can reward a company for high-cost, inefficient methods by making earnings, in large part, dependent on the size of the rate base. 

"The last major telephone rate case took six years to wind its way through the court system and resulted in a settlement agreement that is still provoking litigation. 

"From the calls we have received over the years, it is apparent that customers care more about what Southwestern Bell charges and the types of services available than the company's final profit levels." 

Anthony's proposal is directed at Southwestern Bell, which controls 1.6 million local access lines in Oklahoma, or about 80 percent of those in the state. GTE Corp., which supplies telephone services in Broken Arrow, Coweta, Wagoner and several other communities, controls about 114,000 access lines and is the only other company that would be affected by the proposal. 

Southwestern Bell spokeswoman Karen Kay Speer said the company was encouraged by the chairman's ideas -- especially his proposal to eliminate "outdated earnings regulation." 

"We have been working with the Corporation Commission for more than a year on these issues," Speer said. "We will continue to work with the commission to reach a speedy resolution that benefits consumers and enhances the state's economic development efforts. "We look forward to  looking at the details of Chairman Anthony's plan and we hope the commission will approve a reasonable alternative regulatory plan in time for the legislature to approve it." 

AT&T Corp. spokesman Kerry Hibbs said increasing the discount rate offered to competitors for use of Bell's network "sounds pretty good." 

Commissioners Denise Bode and Ed Apple said Anthony's ideas would contribute to the discussions of alternative telecommunications regulation that will be held in a series of public hearings during the next week in Tulsa and Oklahoma City. 

"The (commission) staff, Southwestern Bell and AT&T have proposals out there," Bode said. "To the extent possible, I'm trying to bring the parties together so we can have a streamlined process for alternative regulation that the industry can live with." 

With passage of the Telecommunications Act of 1996, Congress hoped to open the local markets of the former Bell operating companies, which had enjoyed local exchange monopolies after the breakup of AT&T in 1984. The law was touted by supporters as providing consumers with greater choices over their telecommunications services, while additional competition would force providers of those services to maintain and upgrade existing telephone plant and equipment. Despite Southwestern Bell's investment of more than $ 1 billion to implement local competition and the company's signing of more than 32 interconnection agreements with competitive local exchange carriers, Bell still controls the lion's share of local access lines. 

Its competitors say Southwestern Bell, the subsidiary of San Antonio, Texas-based SBC Communications Inc., is thwarting local competition. Several long-distance companies and local telecommunications providers alleged in a series of public meetings last year that SBC and its subsidiary have refused to honor interconnection agreements, mishandled service orders, pulled circuits off the market to prevent Internet service providers from testing high-speed data lines, and threatened legal actions to frighten users from doing business with competitors. 

Twice in the past two years, a commission administrative law judge found that Southwestern Bell had not opened its markets to competition -- a prerequisite for the company being allowed into the long-distance market. 

Anthony said he is offering his proposal to get competition moving. 

"I know from my business background that a fair and open market can respond to customer needs, offer choice and produce prices more in line with the cost of providing service quicker and more effectively than a bureaucratic system in which the attorneys contest data requests and rule interpretations," he said. 

"We want potential competitors to know that the welcome mat is out in Oklahoma." 

© 1999 The Tulsa World


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