Deal Quietly Sells Out Coloradans And Local Phone
Competition For Years To Come
DENVER, November 23, 1998 --
A group of concerned competitive local phone companies is urging the
Colorado Public Utilities Commission (PUC) to reject a proposed deal
that allows U S West to pocket more than $100 million in excess
profits per year paid by consumers and fails to prevent future
overearnings by the monopoly while hampering local phone competition
for years to come.
ICG Netcom, MCI WorldCom, McLeodUSA, and NextLink oppose the pact
as proposed by U S West, the Office of Consumer Counsel (OCC), and
staff of the PUC because it is harmful to the public interest,
anti-competitive and may contravene the pro-competitive policies
mandated by both state and federal law. At minimum, the companies
call on the PUC to drastically modify the U S West Overearning
Stipulation Agreement.
"Approval of this deal will tell U S West that it's okay
to take too much of its customers' money and it's alright to
thwart new competitors' attempts to offer consumers a choice for
local phone service in this state," explained Cindy Schonhaut,
ICG's Executive Vice President of Government and Corporate
Affairs.
"Even worse," said Bill Levis, Regional Director for MCI
WorldCom's Public Policy, "it says that U S West's
anti-consumer acts will be rewarded by allowing it to pocket millions
of dollars in excess profits and exercise an unprecedented level of
freedom from consumer protection-a combination that all but
guarantees that the majority of Coloradans will have no alternatives
for their local phone service for the next five years."
In their reply comments filed at the PUC late last Friday, the
opposing parties explain how the deal gives U S West deregulation of
virtually every phone service it offers, as well as extraordinary
contracting flexibility and other significant advantages over
alternative carriers. The companies point out that U S West seeks
this emancipation from regulatory oversight, even though being
granted such freedom while it still wields monopoly power gives U S
West the ability to crush its competitors.
The proposed Agreement settles on an overearnings estimate of $84
million. However, there are no studies, audits or factual evidence
that conclusively determine the true amount that U S West has
overearned. Many parties, including the OCC, believe they could prove
U S West excess profits of $130 million and some believe the actual
number may be more than double the settlement amount per year. That
leaves a lot of money in U S West's pockets.
Though the deal's opponents acknowledge that their position
may appear unpopular in the face of a so-called rate freeze-a closer
look at the actual terms and conditions reveals that its alleged
up-front savings could cost consumers much, much more in the long
run.
Contrary to the way this settlement was initially sold to the
public, it does not freeze local phone rates or prevent U S West from
seeking rate increases in exchange for giving U S West pricing
flexibility. The opposing parties point out that in Utah, the
Chairman of the Public Service Commission testified that Utah made a
mistake in granting U S West nearly identical regulatory freedom in
his first biannual report on the state of telecommunications.
"In Utah, U S West continues to overearn to the tune of $29
million annually, and under the state's regulatory scheme the
Commission is powerless to recoup those overearnings. The public
needs to ask itself how much and how long it's willing to lose to
U S West," points out ICG's Schonhaut.
Under the terms of this Agreement, both the OCC and PUC staff have
agreed to surrender their rights to challenge U S West on any issues
contained in the Agreement if it is adopted.
"Essentially, the OCC and PUC staff are severely limiting
their ability to fulfill their role as a consumer watchdog,"
said David R. Conn, Vice President of Law and Regulatory Affairs for
McLeodUSA. "Our concern is that this Agreement lacks any mention
of pro-competitive provisions that would accelerate the development
of competition in Colorado as anticipated under both state and
federal law. We continue to maintain that regulatory and Commission
oversight is essential until widespread, effective competition takes
hold. This action puts at risk our ability to compete effectively in
the state of Colorado. More importantly, if this Agreement stands,
the long-term loser will be the citizens of Colorado."
"If the OCC and the PUC staff are successful in obtaining
approval from the PUC, it's difficult to fathom how they can
expect any competitor to risk the multi-million dollar investments
necessary to provide competitive local phone service statewide,"
says MCI WorldCom's Levis. "This deal is a bad bet, with a
stacked deck. Worse yet, it's a hand we will have to play for
five long years."
ICG Netcom is the brand name for products and services from ICG
Communications, Inc. (NASDAQ: ICGX) and ICG's subsidiary, NETCOM
On-Line Communication Services, Inc. The combined entity is a leading
integrated communications provider (ICP) offering high-quality
telecommunications services. Headquartered in Englewood, Colo., ICG
has extensive switched fiber-optic networks and offers local, long
distance and enhanced telephony and data services in California,
Colorado, the Ohio Valley and parts of the southeastern United
States. The company provides Internet communication solutions,
connectivity and web site hosting to individuals and to small- and
medium-sized businesses through its subsidiary, NETCOM On-Line
Communication Services, Inc. ICG also is a leading designer and
installer of copper, fiber and wireless infrastructure for buildings
and campuses. Further information is available on ICG's web site
located at
www.icgcomm.com
.
MCI WorldCom is a global communications company with revenue of
more than $30 billion and established operations in over 65 countries
encompassing the Americas, Europe and the Asia-Pacific regions. MCI
WorldCom is a premier provider of facilities-based and fully
integrated local, long distance, international and Internet services.
MCI WorldCom's global networks, including its state-of-the-art
pan-European network and transoceanic cable systems, provide
end-to-end high-capacity connectivity to more than 38,000 buildings
worldwide. For more information on MCI WorldCom, visit the World Wide
Web at
www.wcom.com
.
McLeodUSA, with operations in 8 Colorado cities, is a provider of
integrated telecommunications services to business and residential
customers in ten Midwest and Rocky Mountain states. McLeodUSA is a
facilities-oriented telecommunications provider with 7 switches,
366,800 local lines, 5,000 employees, and over 6,300 route miles of
fiber optic network. In the next 12 months, the Company's
publishing subsidiaries will distribute nearly 16 million copies of
competitive directories in 20 states, reaching 28 million people or
10 percent of the nation's population. For more information on
McLeodUSA visit our website at
www.mcleodusa.com
