he state will hear from large companies that want to raise fees for competitors to use their networks.
By LOUIS HAU
Published February 21, 2004
Big phone companies such as Verizon Communications have said hefty rate increases they are seeking will promote competition. But some competitors are arguing that in another dispute the big companies are trying to subvert competition.
The Florida Public Service Commission is scheduled to begin seven days of hearings Tuesday on whether it should continue requiring companies such as Verizon and BellSouth to lease access to switches and other parts of their phone networks to competitors at regulated rates.
Verizon and BellSouth say the requirement should be dropped in the Tampa Bay area and elsewhere in the state in part because, they argue, the rate is artificially low and discourages further investment. Alternative carriers respond that not having access at current rates to network switches - which are required to complete a phone call - would cripple competition.
At stake, both sides agree, is whether Florida will develop a truly competitive phone market.
"If you want the wired market to look like the wireless market, to look that vibrant and competitive, you have to fix retail and wholesale prices," said Alan Ciamporcero, Verizon's Southeast regional president for public policy and external affairs.
But Gregg Smith, chairman and chief executive of Z-Tel Technologies Inc. of Tampa, said, "The only reason they want to remove (the access requirement) is to remove competition."
The case before the PSC follows closely the commission's unanimous vote in December to approve requests from Verizon, BellSouth and Sprint to sharply increase their local basic rates in the name of enhancing competition. In exchange, they agreed to make corresponding cuts in the access fees they charge long-distance carriers for in-state long-distance calls. The rate increases are on hold because state Attorney General Charlie Crist and consumer advocates have appealed the PSC's decision to the state Supreme Court.
While the big phone companies and most alternative phone carriers supported higher local rates, they are deeply divided on wholesale switching rates. Verizon and BellSouth are facing off against Z-Tel, AT&T and other companies that offer competing local services. They also face opposition from Sprint, which is the established phone carrier in all or parts of 37 Florida counties, including Citrus, Hernando and Pasco. But Sprint is also an alternative phone carrier elsewhere in Florida, as well as in 35 other states.
"We're still in the infancy stages here trying to develop competition in our markets," Sprint spokesman Jason Duff said. "We should do everything we can to encourage competitors."
The PSC's review of switching requirements comes at the behest of the Federal Communications Commission. Under the federal Telecommunications Act of 1996, the FCC was required to review phone competition policies every three years. In its latest triennial review order, the FCC has asked state regulators to review the status of local phone competition in their respective states by late June 2004.
A key issue is the requirement that established carriers lease parts of their networks, including switches, to competitors. The logic had been that it would be too expensive for many would-be competitors to build their own networks and still offer much competition to established carriers.
But Ciamporcero noted that some competitors have already invested in their own switches. In addition, he argued, the current regulated rate at which Verizon leases access is below the cost incurred by the company to build and maintain the network. The PSC voted in October 2002 to cut Verizon's access fees, but the company appealed the decision to the state Supreme Court. The court has yet to rule on the matter.
"If people come in and take our investment and make money with it at our expense because we're subsidizing them, it takes away our business and it takes away our incentive for investment," he said. "It's good for the consumer only if people are making their decisions based on economics."
Duff agreed that competitors are free to build their own networks. But he added that the access requirement remains important because "it allows competitors to come into places where they may not have the capital to invest in infrastructure."
Z-Tel's Smith said losing network access at regulated rates would complicate efforts by alternative carriers to attract investor capital because "it makes people think the deck is stacked" in favor of established carriers.
Jaimie Hardin, Southern regional vice president of regulatory affairs for AT&T, warned that doing away with the access requirement would be a step back toward the establishment of monopolistic phone companies. She noted that Verizon and BellSouth, which are the dominant local-service carriers in their respective markets, have a large and growing share of long-distance customers as well.
"Competition has really only just begun, so consumers don't really know what they could lose," Hardin said.
- Louis Hau can be reached at hau@sptimes.com or 813 226-3404.
