Competitors Claim Savings Over SBC

May 27, 2003
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LANSING — Ratcheting up their campaign against SBC Communications Inc.’s push to raise wholesale rates, companies that provide competing local telephone service in Michigan claim they saved consumers more than $72 million last year alone.

The study from the Michigan Alliance for Competitive Telecommunications — a coalition comprised mostly of competing local phone service providers — claims that if existing conditions remain, consumers across Michigan will save another $135 million the remainder of this year on their residential phone bills as a result of increased competition.

In addition to several competing local exchange carriers, the alliance — known as MiACT — also consists of two not-for-profit interests: the Small Business Association of Michigan and the Michigan Consumer Federation.

The MiACT study’s release this month represents the latest shot fired in an increasingly bitter battle between SBC and its local exchange competitors — carriers that lease SBC’s telecommunications network space to sell local phone service to consumers.

“There is every reason to believe that these initial savings will grow as competition increases and reaches more and more consumers across the state,” the study concluded.

MiACT says the study’s results are based on samples of phone bills of households that were analyzed from January 2001 to September 2002 to gauge 2002 savings, and to estimate the potential 2003 savings.

Savings stems from the lower rates offered by competitors and the reductions SBC made in its own local rates as competition emerged.

An SBC Communication spokeswoman called the MiACT study “wholly inaccurate” and “an oversimplistic view” of the situation that offers guesstimates.

SBC’s Denise Koenig also questions why national competitors like rival telecom giants AT&T and MCI charge the same retail rates in other states for local phone service, when they’re paying different wholesale rates to lease phone lines.

“How are they saving Michigan consumers money? They’re not, not if they’re offering the same price in all the states,” she said.

Under terms of the federal Telecommunications Act of 1996, phone companies that held a monopoly position in a state were required to grant competitors access to their networks at fair rates in order to foster market competition.

State regulators set the wholesale rates that SBC charges its competitors. SBC competitors now lease about 20 percent of SBC’s phone lines.

MiACT issued its report shortly after SBC Communications announced it again had asked the Michigan Public Service Commission to review the costs of those phone line leases.

SBC Communications contends the present state-set wholesale rate of $14 per phone line per month is below its costs to maintain each line. In fact, SBC claims the rates essentially represent a subsidy for its competitors that enables them to avoid investing and developing their own infrastructure that can better foster competition.

“Michigan consumers and business customers will suffer if sustainable competition and continuous investment in the local telecom network are not given top priority,” Koenig said.

The telecommunications giant, based in San Antonio, Texas, pegs its cost to lease and maintain a phone line at $32 per month per line.

MiACT’s members, on the other hand, claim that the current lease rates of $14 per month per line are already too high and do provide a fair profit to SBC.

The MiACT study contends that if its members are forced to pay the wholesale rate that SBC wants, “the competitive market in Michigan would collapse” and competition for local phone service would virtually come to an end.

“That will kill competitors, and mean an end to lower rates for Michigan,” said Jerry Finerock, the founder of LDMI Inc., a competing provider of local phone service based in the Detroit area.

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