Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, October 20, 1994 TAG: 9410200066
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: RICHMOND LENGTH: Medium
Most Virginians will pay too much for telephone service under a deregulation plan approved by the State Corporation Commission, the president of a consumer advocacy group said Wednesday.
``This order is just a disaster for telephone users,'' Jean Ann Fox of the Virginia Citizens Consumer Council said.
Three major local phone companies have until Dec. 1 to decide whether they will participate in the plan, which would allow them to make unlimited profits but would cap fees for some services beginning next year.
Paul T. Miller, spokesman for Richmond-based Bell Atlantic-Virginia, said the change will benefit consumers by temporarily freezing the basic service rate and eliminating a fee for Touch-Tone service. Bell Atlantic, with 2.3 million customers, is the state's largest phone company.
Also eligible for the plan are Sprint/Centel-Virginia of Charlottesville and Sprint/United Telephone-Southeast of Bristol.
For those companies, the order would end a decades-old regulatory scheme in which rates were based on the cost of providing service. Bell Atlantic's rates now allow the company a 12.55 percent profit margin.
Under the new plan, rates for basic service would be frozen until 1998 for Sprint customers and until 2001 for Bell Atlantic's. After that, rates could increase by no more than half the rate of inflation.
``I don't know of any other business that would be willing to do that,'' Miller said.
Also, fees for Caller ID, Call Waiting and other ``discretionary services'' could increase at no more than the previous year's inflation rate until Jan. 1, 1997. After that, the increase would be capped at 10 percent.
Customers who receive only the basic service - Bell Atlantic's residential rate is $13.59 a month - could actually see a slight decrease in their phone bills due to elimination of the 60 cent Touch-Tone fee. Miller said that change will cost Bell Atlantic $25 million a year.
But Fox said phone bills should be declining even more because the cost of providing service has drastically decreased since the last telephone rate case a decade ago.
``We are locking in place rates that are 10 years old in a declining-cost industry,'' she said. ``Can you imagine paying today what you would pay five or six years ago for a VCR or a personal computer? The cost of hardware, fiber-optic cable and all that is dropping.''
The one aspect of the SCC order that consumer activists liked was a demand that the companies expand reduced-rate service to the poor. Currently, only customers eligible for Medicaid can receive basic service at a reduced rate. The SCC expanded the program to include people receiving food stamps.
About 6 percent of Virginians do not have a telephone, SCC spokesman Ken Schrad said.
by CNB