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California | Michael Hiltzik GOLDEN STATE

SBC, It's All in the Way You Look at It

June 23, 2003|Michael Hiltzik

For telephone customers of SBC Communications who have suffered through periodic service outages, days-long waits for repair service, abusive sales tactics and other such peculiarities of our Texas-based local phone utility, two state public utilities commissioners last week issued a report that might come as quite a surprise.

The report praised SBC for generally "good service quality."

Written by PUC President Michael R. Peevey and Commissioner Susan P. Kennedy, this assessment was, to say the least, at odds with an earlier report by a PUC administrative law judge who cited SBC for "significant" and "numerous" service problems that in some respects amounted to a "degradation of service quality" over the last few years.

The Peevey-Kennedy appraisal also followed on the heels of a December PUC ruling to the effect that SBC had opened its local phone monopoly to so much competition that it should be allowed to enter the lucrative long-distance business, even though the company's share of the residential local phone business in its franchise area is 93%. I know of Third World dictators who don't insist on that ratio of the votes for president, even when they're running unopposed.

These are just a couple of indications that our state utility regulators may be preparing to get out of the way as SBC -- and to a lesser extent Verizon, the state's smaller incumbent local phone company -- strive to entrench themselves as dominant providers of telecommunication services in California.

Of course, the regulatory issues are seldom stated so bluntly in PUC proceedings. The topic of the latest bureaucratic cross-fire was ostensibly an oversight system the PUC implemented in the early 1990s, when it anticipated an explosion of competition in communications. The presumption was that fusty old utility principles, such as rate-of-return calculations and quality-of-service standards, would be rendered obsolete by the magic of the open market.

The PUC, therefore, created what it called the "New Regulatory Framework," to be abbreviated as NRF and pronounced "Nerf," which gives a pretty good idea of how much backbone it presents to aggressive revenue-seeking outfits such as SBC. Its main flaw, of course, is that the heaven of immaculate competition never materialized in the phone world. Only months after enactment of the federal Telecommunications Act of 1996, which was supposed to unleash the open market, SBC took over Pacific Telesis and the other "Baby Bells" likewise started gobbling each other up.

Although proponents of deregulation argue that local phone companies now face fierce challenges from wireless networks, independent long-distance companies and cable TV systems, the majority of consumers still get most of their phone service at home via the twisted pair of copper wires controlled by the offspring of Ma Bell. In California, says Denise Mann, a telecommunications expert at the commission's office of ratepayer advocate, "SBC and Verizon still have a physical stranglehold on the way into the house."

As a result, the PUC lately has been considering whether NRF may have been a tiny bit premature.

I should say here that there are plenty of people who think NRF doesn't go far enough. G. Mitchell Wilk, who implemented it during his own term as PUC president, now believes that telecommunications regulation is anachronistic: "We've got tons more competition today than we did in 1990," he told me. "If anything, NRF should be replaced by general, broad deregulation."

That doesn't seem to be on the table just yet. Instead, we have a deep ideological split on the commission over what sort of regulation is appropriate. Kennedy, who joined the PUC in January, believes the evidence supports SBC's claim that its California phone service is among the best and cheapest in the nation. She also believes it's time the PUC faced up to the reality that its regulated phone companies are no longer protected monopolies and wards of the commission, but profit-making public corporations facing competitors on all sides.

"Every time some of my colleagues talk about the 'shareholders,' they sound like they're talking about Ken Lay," she says. "It's as though all profit is evil and they're trying to rip off the consumers. But the consumers and the shareholders are often the same people."

But that doesn't absolve the commission of holding the company to strict performance standards and preventing it from stifling newcomers to its business, says Loretta Lynch, the former PUC president who is Kennedy's ideological opposite at the agency. "We're a consumer protection agency," she says, "and we've been derelict in doing our job."

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