Mich., Cal. Votes Loom on SBC UNE Rate Increases
State commissions in Mich. and Cal. are scheduled to vote this week on SBC requests to nearly double unbundled network element (UNE) rates. But competitor and consumer interests in both states told regulators Fri. that UNE increases will stifle local competition and eventually lead to higher phone bills for consumers.
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The Mich. PSC is scheduled to vote tomorrow (Tues.) on an SBC proposal for an 80% increase in its UNE rates, which would increase the average UNE loop rate to $25 from $14. An alternative proposal from an administrative law judge would grant SBC a 20% increase, to $17. SBC said it needs the $25 rate to recover its costs of providing UNEs. But competitor interests urged the PSC to deny SBC any increase.
The CLEC Assn. of Mich. told the PSC that even the proposed 20% increase would force smaller CLECs to raise rates or quit the state. And if the 80% increase were granted, the group said that would just about extinguish local competition. The Mich. Alliance for Competitive Telecom said market penetration by Mich. CLECs offers indisputable evidence procompetition policies of the PSC and Mich. legislature are working. And the Mich. Small Business Assn. said the discussion shouldn’t be about how much to raise SBC’s UNE rates: “We should instead be talking about how we are going to lower them.” CLECs said they'd be hard pressed to compete against SBC retail rates that could be 1/2 of wholesale rates.
The CLECs said that under the FCC’s interim UNE rules, incumbent telcos like SBC could increase UNE rates by up to 15%, on top of whatever increase the PSC granted. Some CLECs said they would be forced to lay off up to 1/3 of their employees if SBC got a large UNE rate boost. But SBC countered that the state’s wholesale rate structure “is simply out of whack with Michigan’s high-tech economy and with the actions in other states that Michigan competes against for jobs and investment.” SBC said wholesale rate reform would allow all local service providers to compete on a more level playing field, “and when companies compete, customers win.”
The Cal. PUC is scheduled to decide Thurs. (Sept. 23) which of 6 alternative UNE rate proposals to adopt for SBC. The proposals call for increases ranging from 2% to 54%. Three of the 5 PUC members have released alternative UNE rate proposals. PUC Comr. Carl Wood offered a revised version of a July UNE increase proposal that was slightly less generous than before. Wood proposed a UNE platform (UNE-P) rate of $16.67 monthly and UNE loop rate of $11.93, or about 21% higher than the current rates of $13.93 for UNE-P and $9.82 for UNE-L. PUC Pres. Michael Peevey offered an alternative that would provide a 35% boost to SBC’s UNE-P price, to $18.85, and raise the UNE-L price 47% to $14.44. Comr. Susan Kennedy offered the most generous proposal; hers would increase the UNE-P rate 40% to $19.60 and the UNE-L rate by 54% to $15.08. There’s also an administrative law judge’s proposal for a 2% UNE increase, SBC’s proposal to roughly double present rates, and CLEC proposals to cut present UNE rates about in half.
Five Cal. consumer groups Fri. sent letters to each PUC member and to state legislative leaders urging that SBC’s UNE rates remain unchanged. The joint letter by The Utility Reform Network, Consumer Federation of America, Consumers Union, Utility Consumers Action Network (UCAN) and AARP California said consumers could end up paying a very high price, depending on which alternative proposal the PUC adopts. The consumer groups said if SBC were granted substantial UNE rate increases based on its costs, it could turn around and argue that its retail rates are too low and seek retail service increases.
“Unreasonably high network costs will also drive up the costs of universal lifeline service, and the California High Cost Fund, which are paid for by surcharges on customer bills,” the consumer groups said: “Any increase in UNE prices will have a domino effect on a variety of services. If the price for a phone line goes up, customers will eventually pay more for all of the telecom services that use that line.” They added that large UNE rate increases would drive many CLECs from the Cal. market, leaving consumers fewer choices.
But SBC said there’s “tremendous competition in telecom right now from places like the Internet and cable- based telephony.” SBC said it can’t go on forever selling access to its network below cost. The 3 proposals from PUC members indicate that SBC has found some sympathy in the agency. PUC Comr. Susan Kennedy said if the state wants to keep jobs, “we have to get real” in terms of what wholesale rates SBC should be allowed to charge