Ring Ma Bell

When heavyweight Southwestern Bell gets into a brawl with AT&T at the Legislature, consumers--that's you--are the ones who get beat up

What Southwestern Bell wants, and probably will get, is freedom to raise rates on nearly all of its services, effectively getting the state's regulator, the Public Utility Commission, out of its business. Taking note of the Legislature's proclivity to lower access rates, Bell is willing to negotiate a reduction even though the company insists the existing rate subsidizes a loss it incurs from keeping the basic rates for local service among the lowest in the nation.

Although the legislation now under consideration in Austin changes almost hourly, Bell appears willing to appease lawmakers by agreeing to freeze that basic residential rate along with the price of its most popular premium service, call waiting, until perhaps 2005. In exchange, the company will be able to set prices for just about everything else without PUC interference.

PUC Commissioner Judy Walsh repeatedly has warned legislators of the dangers of giving Bell too much pricing flexibility too quickly. Although legislators moved to open local phone service to competition with its 1995 telecommunications reform law, Bell remains Texas' local phone monopoly. Bell disagrees, pointing to the 200-plus companies licensed to provide local phone service in Texas. The fact remains, though, that Bell has 97 percent of the customers within the mostly urban markets where it does business.

"A market with a 97 percent market share will not police itself," Walsh told a Senate committee recently.

Walsh, along with smaller phone companies that want to be able to compete in local residential service, figures Bell will engage in predatory pricing. They fear that Bell would chase away competitors by charging cut rates on services, and that once competitors have left Texas, Bell would raise its prices, which it would be able to do without state regulatory interference. The short-term benefit of low prices is outweighed by the long-term consequence of high prices charged by an unregulated monopoly, they argue.

So would consumers benefit at all from the Bell trade-off?
It's possible, perhaps even probable, that long-distance companies will pass on the access-charge reductions to customers, but legislators can't guarantee that--although they might try to convince you they can. Even if the savings are passed on, not all customers would benefit equally. Business customers could experience a bonanza at the expense of residential customers. And customers who rarely place long-distance calls within the state might see annual savings that amount to mere pocket change.

Legislators say they want to pass a telecommunications bill that is good for consumers. But in the frenetic pace of a 140-day legislative session, they have gotten caught up in the lobbying. They are casting this fight as Bell vs. AT&T, when, in fact, it is Bell and AT&T vs. you.

Some legislators admit that when they decide their vote on this most complex of legislation, they will consider factors that have nothing at all to do with the merits of the bill. They will consider that Southwestern Bell is based in Texas while AT&T is based in New Jersey. They will consider Bell's sparkling record of community service. They will consider the job security of Bell's 25,000 union workers. They will consider the trust that they have built over the years with Bell lobbyists. And they will pick their side accordingly.

And Bell, driven by profit and an intense desire to retain its monopoly over local phone service in Texas, will make certain that it is rewarded handsomely for its sacrifice of reducing access charges.

"AT&T was hoist with its own petard," says Janee Briesemeister, senior policy analyst with the southwest regional office of Consumers Union, which advocates more competition in local phone service. "They are the architect of their own doom. They have forced the Legislature to do something, but Bell has the clout to do a quid pro quo and thus do all the other stuff that AT&T and consumers hate."

The lady's head most assuredly was in the clouds.

Officially, it's called House Bill 1701. Some legislators, for simplicity's sake, call it "Bell's bill."

"Around our house," says consumer advocate Sheila Holbrook-White, "we call it the telecommunications wet dream for Southwestern Bell."

If nothing else, the bill is a testament to the confidence and power that Southwestern Bell wields at the Legislature. More than 35 House members fell over themselves to sign on as co-sponsors even though the bill would have lowered access charges a puny 2 cents a minute while giving Bell full control over setting its own prices on a boatload of services, including call forwarding, call return, caller ID, three-way calling, speed dialing, directory assistance, and ISDN lines.

It also would have let Bell launch a new service simply by giving 24 hours' notice to the PUC. Right now, Bell must go through hearings and secure PUC approval before starting a new service. While the bill would have frozen the monthly price for basic residential service at what it has been since 1984--in Dallas, $10.40--it would have let Bell add surcharges and fees at will.

When the bill was filed earlier this year, Southwestern Bell was not listed as its chief author. That's against the rules. Instead, the bill carried the name of Rep. Leticia Van de Putte, a San Antonio Democrat who later this year is expected to launch a campaign for an open state senate seat. One of her opponents is likely to be Puente, her House colleague with a reputation for standing up to Bell.

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