Kentucky telephone companies pushing for option to end basic service

jcheves@herald-leader.comFebruary 16, 2012 

FRANKFORT — Kentucky's telephone industry wants the option to end basic phone service in less profitable parts of their territories if other communications options, such as cell phones or the Internet, are available in the area.

The industry hopes to build on its 2006 legislative success in deregulating basic land-line phone service, arguing that it needs to shift its resources to cell phone and broadband communications.

But consumer advocates warn that rural communities, the poor and the elderly could be among those left behind if basic phone service disappears.

"For a lot of people in Eastern Kentucky, their land line is their life line," said Cathy Allgood Murphy, AARP Kentucky's associate state director. "They may not be able to afford an Internet connection, and they don't have cell phones because their communities, in the mountains, don't get cell phone reception."

The industry is pushing Senate Bill 135, referred to as "the AT&T bill" by its sponsor and others because it originated with that company's lobbyists. The bill would strip the Kentucky Public Service Commission of most of its remaining oversight of basic phone service provided by the three major carriers — AT&T, Windstream and Cincinnati Bell — such as the power to initiate investigations into service problems.

More significant, critics say, the bill would let the companies end basic phone service in less profitable parts of their territories if other communications options. State law now requires the companies to serve as "carriers of last resort" for households throughout their territories.

AT&T says it must follow where the market leads. Among its customers, land line usage has dropped 50 percent over the last 10 years and wireless usage has jumped 300 percent, said AT&T spokesman Brad Rateike.

"“This is one of the reasons we (wanted to buy) T-Mobile, so we could build out the wireless spectrum and offer higher speeds and higher quality coverage to all of Kentucky, including Harlan County," Rateike said.

The Public Service Commission, which regulates many of the state's utilities, already has lost much of its authority over traditional phone carriers, following the General Assembly's passage of a deregulation bill in 2006.

As of last summer, for example, the PSC no longer can rule on price increases for carriers that choose to deregulate. Since then, AT&T and Cincinnati Bell have notified the PSC of increases for basic residential phone service. Cincinnati Bell's monthly price rose by 17 percent to $19.75, according to the PSC, while AT&T's cheapest price group rose by 20 percent to $18.20 per month.

Traditional phone carriers say it's unfair to burden them with state regulations and service requirements that don't apply to their cable and wireless competitors. But some communities that depend on land lines could be abandoned under the bill, said Tom FitzGerald, director of the Kentucky Resources Council.

Given a choice, the phone carriers may drop "those on fixed and low incomes, those in hard-to-serve locations and those for whom the cost of service does not justify continued service absent the legal obligation to do so," FitzGerald said.

The bill's sponsor, Sen. Paul Hornback, R-Shelbyville, said he doesn't want households to lose any existing phone service. Hornback said he will change the language in his bill to make that clear after it's scheduled for a committee vote as early as next week.

"There will be no abandonment," Hornback said Thursday. "It doesn't state that specifically in its current language, and we've heard some concerns, so that will be added."

Hornback said his bill started as a proposal from AT&T lobbyists, who approached him because they recognized his pro-business sensibilities.

"People call it the AT&T bill because that's the biggest company," Hornback said. "But it helps Windstream and the others, too."

AT&T is a significant force in Frankfort. It employs 31 legislative lobbyists, including a former PSC vice chairwoman and past chairs of the state Democratic and Republican parties. Its political action committee has given at least $91,000 in state campaign donations since 2007.

Also Thursday, the telephone industry testified against House Bill 209, which would require phone carriers to "make every effort" to fix service outages within 24 hours.

There would be no penalty if carriers failed to act in 24 hours, but they would have to report problems to the PSC in any month during which they failed to clear 85 percent of their outages within that time.

Several witnesses told the House Committee on Tourism Development and Energy of households that have waited two to three weeks for phone service to be restored.

Phone carriers were required to act within 24 hours of an outage until the legislature voted in 2006 to deregulate phone service, said Rep. Rick Nelson, the sponsor of HB 209.

"Now I've got buyer's remorse," Nelson, D-Middlesboro, told the committee. "I think we can expect transparency and we can expect good service, and I think that we're letting them off the hook."

The committee chairwoman, Leslie Combs, D-Pikeville, allowed discussion on Nelson's bill but did not schedule a vote. Combs said she wants more information on the extent of phone service outages, something that Nelson said can be difficult to provide because the PSC no longer is authorized to track individual outages and company response times.

The phone industry told the House committee that Nelson's bill would be burdensome, particularly for the 20 smaller, independent carriers. Phone carriers' competitors in the cellular and broadband industries don't work under such rules, an industry spokesman said.

"It will cause an increase in operating costs," said Forest Skaggs III, executive director of the Kentucky Telecom Association.

Rep. Jim Gooch, D-Providence, said the government should not dictate how quickly customer complaints are handled.

"I don't think it's up to us to determine if a company is providing the proper service," Gooch told his colleagues on the committee. "I think the customer can decide that."

John Cheves: (859) 231-3266. Twitter: @BGPolitics. Blog: bluegrasspolitics.bloginky.com

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