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Wholesale SBC Rate Hike Likely

PUC members indicate that they will allow the company to charge rivals 20% to 54% more.

September 10, 2004|James S. Granelli | Times Staff Writer

The California Public Utilities Commission is poised to raise wholesale phone rates by 20% to 54%, a move that critics said would scuttle competition for local phone service in the state.

Three of the PUC's five commissioners released proposals Thursday to increase what rivals pay SBC Communications Inc. to lease the lines and gear they need to offer dial tone to homes and small businesses.

All were assailed by consumer groups and competitors like AT&T Corp. -- and bemoaned by SBC itself, which wants to double existing rates.

The proposals are part of the PUC's periodic review of the rates AT&T, MCI Inc. and a slew of smaller competitors pay to rent SBC's gear.

Commissioner Carl W. Wood, who is overseeing the rate case, revised his previous proposal and called for a monthly rate of $16.67 to rent a platform of lines and equipment.

That's nearly 20% higher than the existing platform rate of $13.93, though about half the $30.33 that SBC, California's dominant local phone company, has requested.

For rivals using their own gear and needing only the lines into homes and businesses, Wood proposed hiking rates nearly 22% to $11.94 a month from the existing $9.82.

"You can kiss the competitive industry goodbye," said Regina Costa, research director at the Utility Reform Network, a consumer advocacy group in San Francisco.

"The competition already is dropping like flies," she said.

AT&T, the biggest competitor of the nation's regional phone giants, stopped marketing local and long-distance service to consumers nationwide in July after the Bush administration retreated from rules that promoted competition.

"Any increase in wholesale rates above where they are today is simply another nail in the coffin for competition and choice in the consumer phone market," said AT&T spokesman H. Gordon Diamond.

But Lora K. Watts, SBC California's president of external affairs, called Wood's draft "a step in the right direction."

She noted that his proposed rates are "still well below the national average and dramatically below [what] it actually costs SBC to provide our lines to other carriers in California."

In setting rates higher, the PUC's Wood determined that SBC's assets had to be written down faster than previously thought because of increased competition.

PUC President Michael R. Peevey and Commissioner Susan P. Kennedy, both of whom typically favor industry's viewpoints, proposed even bigger hikes in their separate proposals. The two other commissioners didn't offer alternatives.

Peevey wants to raise the platform price 35% to $18.85 and boost the line rate 47% to $14.44. Kennedy would increase the platform price more than 40% to $19.60 and the line rate nearly 54% to $15.08.

Neither of those drafts is expected to win over a majority, so Wood's proposal is likely to be approved at the PUC's Sept. 23 meeting. SBC could raise wholesale rates soon after the vote, but the company insists customers should not see their bills rise. Competitors disagree, saying they must pass along the costs.

Peevey's position has changed considerably. He and Commissioners Geoffrey F. Brown and Loretta M. Lynch have said previously that they expected final rates to be close to the current 2-year-old rates that have spurred competition among companies offering local phone service.

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