Major shift planned in phone rate rules - Regulators consider local competition

by Bob Vandewater

The Daily Oklahoman - October 19, 1999

The state Corporation Commission on Wednesday is expected to consider proposed rules that could lead to changes in the way Oklahoma's major local telephone utilities are regulated and stimulate local phone service competition.

In a meeting Monday, the three corporation commissioners decided what they wanted included in or deleted from certain sections of the proposed rules.

The commissioners also let phone industry insiders and commission staff try to reach a consensus on other parts.

A final version of the proposed rules package is expected to be presented to the commissioners Wednesday so they can decide whether to adopt it and send the rules to the governor for his signature.

Gov. Keating's approval would let new rules take effect on an emergency basis.

Traditionally, rates of Oklahoma's largest phone utilities, Southwestern Bell and GTE, have been figured after commission consideration of such things as the company's earnings and return on its "rate base," or investment to serve customers.

But officials with those utilities have said they believe customers today generally are less concerned with how much profit their phone company earns than with whether rates and prices for service are reasonable and competitive.

The proposed rules would give phone utilities with more than 75,000 customer "access lines" in Oklahoma - which would include Bell and GTE - a way to get out of rate-base, rate-of-return regulation and move to an alternative.

One such alternative in the proposed rules is something called the "Oklahoma Plan."

To opt into that plan, an eligible phone company would have to seek commission approval of a plan governing the company's behavior and commitments during a period of transition to expected competition in the local exchange phone service market.

Under the Oklahoma Plan, the local phone company's basic local service rates would be "capped" for five years, allowing them to go down but not up.

But the company's rates for emerging competitive and optional services would be allowed to rise within certain guidelines and services for which there is effective competition would have a price floor under them.

Commission Chairman Bob Anthony said, "In business, real full competition involves pricing competition....

"Hopefully after a five-year period... you will have many (local service) competitors and they will engage in full price competition.

"But in the transition period, we think that a (price) floor is appropriate so that companies can not be anticompetitive by selling below cost, and we think that a cap on prices, particularly for residential and small business (customers), is appropriate so they do not get harmed by our efforts to have alternate regulation, " the state commissioner said.

© 1999 The Daily Oklahoman

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