SBC to Chicago: Kill Rate Regs

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SBC to Chicago: Kill Rate Regs

Please read this article by clicking on the link. I posted much of it here because it is so good and to be honest, anyone in telecom needs to be aware of these issues. I have some contact info listed at the bottom in red if you are interested in having your voice heard on this matter.

SBC to state: Kill rate regs

Seeks to scrap phone price controls; sweetens offer with 3-year freeze

By Julie Johnsson
March 21, 2005

SBC Communications Inc. is pushing Springfield lawmakers to approve sweeping deregulation that would remove all price controls on local telephone service in Illinois.

A bill introduced by Sen. James Clayborne Jr., D-East St. Louis, would effectively gut the Illinois Commerce Commission's (ICC) oversight of the rates SBC offers customers and competitors. State regulators would still have the authority to penalize the Baby Bell for shortfalls in customer service, however.

To sweeten the deal, SBC proposes a three-year freeze on the price of basic phone service for consumers who purchase only a dial tone from the Baby Bell or minor add-ons, such as caller identification. That's about 50% of the telephone giant's Illinois customer base.

The rate freeze would not apply to customers who bundle their local phone service with long-distance or broadband. Rates for such packaged deals, SBC says, will fall as competition builds with Comcast Corp., the dominant cable operator.

Not content to wait for lawmakers to act, SBC also has asked a U.S. District Court in Chicago for a temporary restraining order that would bar the ICC from determining how SBC rents out parts of its local phone network to other phone companies.

"We need the pricing flexibility that all our competition has," says SBC Illinois President Carrie Hightman, alluding to wireless carriers, Internet-based calling services and Comcast. "No other competitor has the pricing restrictions and regulatory hurdles that we have."

But the market is far from competitive, consumer activists and SBC foes argue, since traditional land-line telephone customers have little alternative to SBC's local service now that Virginia-based MCI and New Jersey-based AT&T Corp. are about to exit the picture.

Critics say eliminating price controls and the ICC's oversight would allow SBC to crush its rivals and raise prices at whim. "It's a complete frontal attack on everything that has created competition in Illinois," says Michael Ward, president of the Illinois Alliance of Competitive Telephone Cos., a group representing smaller SBC rivals.


Illinois is one of a dozen states mulling legislation to lighten or eliminate telephone price controls entirely. As of March 11, the Federal Communications Commission (FCC) dropped rules dating to 1996 that require dominant local phone providers such as SBC to sell access to their networks on an à la carte basis, at rates set by local utilities regulators.

Illinois lawmakers must decide whether to rewrite or extend a 2001 law, expiring in June, which implemented the old FCC policy requiring SBC to open its local network to phone companies such as MCI and AT&T.

Rates tumbled after the long-distance providers entered the Chicago market in 2002. However, SBC is acquiring AT&T; two other Baby Bells are competing to buy MCI.

SBC, in its emergency court motion and discussions with Illinois lawmakers, says that the state law and much of the rest of Illinois' 20-year-old telecom regulatory structure have to go because they now conflict with the FCC's new stance.

But it isn't yet clear whether the FCC policy provides a minimum standard upon which states can overlay their own regulations, or whether it is really the maximum, counters state Rep. Julie Hamos, D-Evanston, who favors waiting a year before rewriting Illinois telecom law.

"There is very much a central issue in all of this: Has the federal government pre-empted our ability to move in a certain direction?" she says. "The burden is on (SBC) to show why we can't wait another year with all the flux we're in."


Ms. Hightman points to the emergence of new technologies, such as Internet-based calling, that are creating a vibrantly competitive market where there's no need for price restraints. "Every consumer in Illinois has a competitive option available to them. Every consumer has the ability to bypass our network to communicate," she says.

But while nascent technology like voice over Internet protocol could provide true competition down the road, it currently accounts for less than 1% of the market, consumer activists note. And wireless isn't the threat it appears to be, since SBC owns 65% of the nation's largest carrier, Cingular Wireless.

"The left hand competing with the right hand is not exactly effective competition," says Martin Cohen, executive director of the watchdog Citizens Utility Board.


SBC says unregulated rivals have an unfair edge, but critics warn removing rate controls will tilt the market to the phone giant.

What the bill means for consumers:
• Three-year price freeze for those with most basic phone options, about 50% of SBC's customer base
• Lower prices if SBC moves quickly to match Comcast discounts
• Higher prices if meaningful competition doesn't materialize

What it means for SBC:
• Levels the regulatory playing field with Comcast
• Ability to boot competitors from its network, raise wholesale prices at will
• Not required to invest in phone infrastructure
• No state laws more restrictive than federal rules

Source: SB 1700

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