SBC Hits Redial On Price Hike

May 9, 2003
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Competing local telephone service providers are hoping state regulators will quickly turn down SBC Communications Inc.’s push to raise wholesale rates.

The competitive local exchange carriers claim that allowing SBC Communications to more than double what it now charges them to lease network space to offer a competing service would cripple their business and bring competition for local telephone service in Michigan to a halt.

Dave Waymire, a Lansing lobbyist representing the Michigan Alliance for Competitive Telecommunications that consists of competing local phone service providers, is confident the Michigan Public Service Commission will turn back SBC’s request.

“I would be stunned if the commission didn’t reject this summarily,” Waymire said. “This will virtually eliminate all competition in Michigan. They (SBC) know that and the Michigan Public Service Commission knows that.”

SBC Communications, after having a previous proposal turned down last summer, asked the MPSC this month to review the costs to lease space on its telecommunications network to local service competitors.

SBC Communications contends the present rate of $14 per phone line per month is far below its actual costs and represents a subsidy for its competitors. The San Antonio, Texas-based telecommunications giant pegs its cost to lease and maintain a phone line at $32 per month.

Without an increase in the wholesale rate, local competitors — fellow telecom giants AT&T and MCI among them — have no incentive to invest in their own telecommunications infrastructure in Michigan, SBC Communications contends. Adjusting the wholesale rates would “foster and maintain sustainable competition,” the company said.

“Pure and simple, Michigan’s telecommunication network is at risk today with below-cost wholesale prices. The current rates deplete funds needed to maintain and improve the network,” said Gail Torreano, SBC Communication’s president in Michigan.

“Many things happen when a business is required to sell its services below cost — and none of them are good,” Torreano said. “Companies who exploit this artificial, below-cost pricing do not bring jobs, innovation, technology or investment to the state. Consumers ultimately lose in this scenario.”

SBC Communications’ competitors contend otherwise. They claim that SBC Communications makes a “fair profit” on the current wholesale rates, last set in 2000 by the MPSC using federal guidelines.

Raising the wholesale rates is merely an attempt by SBC to drive out competition, competitors claim.

Under terms of the federal Telecommunications Act of 1996, phone companies that held a monopoly position in a state are required to allow competitors access to their networks in order to foster market competition. That has given birth to new competitors who lease space on the network and sell local phone service to retail customers.

About 20 percent of SBC Communications’ phone lines are now leased by a dozen local service competitors.

The MPSC, citing procedural issues, last August rejected SBC Communications’ request to raise the wholesale fee from $14.44 to $34 per phone line, although regulators left the primary issue of the proposal’s merit undecided.

In addition to calling for the rejection of the wholesale rate increase, the Michigan Alliance for Competitive Telecommunications also wants the MPSC to withdraw its support for SBC Communication entering into the long-distance telephone market in Michigan.

SBC Communications has filed its request to the MPSC as a contested case proceeding, which should expedite the review, spokeswoman Denise Koenig said. The company, which has filed similar cases with regulators in Illinois, Ohio and other states, wants to resolve the issues as quickly as possible, she said.

“This is really impacting our business and it’s impacting Michigan’s telecom network,” Koenig said.               

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