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Information superhighway costs show up in phone bills

Published Oct. 6, 2005

Amid all the hype about the information superhighway, policy-makers always promise that industry, not taxpayers, will shell out the hundreds of billions of dollars needed to upgrade the nation's communications links.

But read the fine print: While the charge may not affect tax returns, it already has shown up on telephone bills, and it probably will continue to do so _ a point being pressed by Rep. Mike Synar, D-Okla., and the consumer lobby.

State public utility commissions have long allowed the regulated local Bell telephone companies to pass on to customers the cost of upgrading computer switching equipment or laying fiber-optic cable. By installing newer and cheaper technologies, the theory goes, the phone companies will operate more efficiently, and that will lower phone bills.

Advances in technology have led to a roughly 6 percent annual decrease in costs to local phone companies, according to the Consumer Federation of America.

But now the Bells want to use those same phone lines and switches for new, unregulated ventures, ranging from long-distance service to interactive television. And some lawmakers are asking why ratepayers should be forced to help them out.

A bill by Reps. Edward Markey, D-Mass., and Jack Fields, R-Texas, would allow the Bells and the cable industry to compete in each other's businesses but would prohibit the Bells from using their local monopoly revenues to prop up their new competitive ventures.

Synar and the consumer lobby want to go further, however. The cross-subsidy ban, they argue, applies mainly to the operating budgets of local phone companies and doesn't properly take into account what the Bells spend on capital improvements _ upgrades that someday will help the Bells compete in the free market.

At a March 1 markup in Markey's House Energy and Commerce Telecommunications and Finance Subcommittee, Synar unsuccessfully offered an amendment that would have required the Bells, and their competitors who lease their networks, to share all the "joint and common costs" incurred in building the network. This essentially would have shifted the cost of expanding the network to the industry and barred the Bells from passing the costs on to local ratepayers.

As an enforcement mechanism, Bell companies that offer video programing, for example, could not charge local telephone customers any more than would a similar Bell company that doesn't offer video service.

Bradley Stillman, the Consumer Federation of America's legislative counsel, said his group's support for the Markey-Fields bill depends on acceptance of the Synar amendment. "If the bill is passed in the form it's in now, it would lead to higher rates to consumers," he said.

A longtime Synar friend and Bell advocate, Rep. Rick Boucher, D-Va., staunchly opposes the amendment. Boucher concedes that consumers ought to see some reduced rates as a result of the industry's declining costs, but he says the Bells need a "financial incentive" to continue upgrading the nation's communications infrastructure.

Faced with opposition by Boucher, silence from Markey and reservations from other panelists, Synar withdrew his amendment until full committee action later this month _ at which point Markey indicated he would be inclined to support the effort.