Telephone Rivalries Cut Bills, Study Says

By Jon Van
Chicago Tribune

February 12, 2003

Local phone competition saved Illinois consumers more than $130 million in 2002 and could lead to a savings of $300 million this year, according to a study commissioned by rivals of SBC Communications Inc.

The savings are largely due to a state law passed in 2001 that requires SBC to share network elements with competitors at low wholesale rates, the study concludes.

Yet state lawmakers and competitive carriers warned Tuesday that savings will evaporate if the law is changed. They also spoke against any moves by federal regulators to undo burgeoning competition.

SBC and other Baby Bells are battling AT&T Corp. and local rivals in a tug-of-war over competitive phone service. The local findings are part of a national lobbying effort to sway members of the Federal Communications Commission, who were set to make a decision on Thursday.

But in Washington on Tuesday, the FCC postponed taking action that could have weakened competition to the Bells.

The local study, an analysis of 2,200 Illinois phone bills, found customers served by competitive companies paid about $50 million less for phone service last year than they would have been charged for similar service from SBC. It also estimates that rate cuts instituted by SBC in response to competition saved SBC customers some $80 million during the year.


Reforms Fueled Savings

"This study clearly demonstrates that reforms adopted by the state legislature in 2001 are working for the people of Illinois," said Gary Mack, executive director of the Illinois Coalition for Competitive Telecommunications, a group backed by AT&T Corp. and others.

But SBC Illinois President Carrie Hightman called the findings "hypocritical" because Mack's group opposes SBC's bid to offer long-distance service to Illinois customers.

"For them to pretend they worry about the consumer is inconsistent," Hightman said. "They don't care about consumers, just how much profit they can make."

She said SBC expects Illinois consumers will save hundreds of millions more once it enters the long-distance market, which SBC hopes to do by the end of summer.

Hightman said she couldn't comment on the study's numbers but agreed that competition has cut prices. She added that the savings probably exceeded those in the study. "They don't even address the savings consumers make by using wireless or e-mail instead of traditional phones," Hightman said.

At a news conference, state Rep. Julie Hamos (D-Evanston) said she is "thrilled to see the law is working, and we have real numbers to back that up. It's important that we don't tinker with that law."

State Sen. Steven Rauschenberger (R-Elgin), another backer of the state telecom law, said he is concerned that the FCC may be moving away from enforcing the 1996 federal law that supports phone competition.

"We're optimistic that the FCC won't make a stew out of what is now a pretty good roast," Rauschenberger said.

The FCC had been scheduled to decide Thursday whether to modify the terms by which rival phone companies can access networks operated by dominant carriers such as SBC. Michael Powell, the FCC chairman, postponed the decision for a week.


Telecom Still Suffering

Powell, who is concerned that the telecom sector has been in a depression for two years, has largely accepted the argument from SBC and other Bells that if their burden of sharing facilities with rivals were lightened, they would invest more money in upgrading networks. That, in turn, might lift Lucent Technologies, Nortel Networks and other equipment-makers from their current downturn.

But Powell has been unable to win support from other FCC commissioners. An order written by the FCC staff at Powell's direction would effectively end local phone competition for most residential customers, rival firms say.

While Commissioner Kathleen Abernathy, a Republican, supports Powell, Kevin Martin, a Republican, has joined two Democrats, Michael Copps and Jonathan Adelstein, in supporting an alternative that would leave competitive policy matters to state control.

That approach pleases competitive carriers because many states, like Illinois, have local policies that favor competition. The position also has drawn support from conservative policy groups that generally favor states rights over policies imposed by Washington.

Powell postponed Thursday's decision because he doesn't have the votes, said Tom Koutsky, vice president of law and public policy for Z-Tel Communications, a competitive phone-service provider.

"He wanted to give the Bell lobbyists more time to drum up another vote for his position," said Koutsky. "Frankly, this meeting hasn't suffered from a lack of lobbying. It's the clearest signal we've had that the chairman's proposal is essentially dead."