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Nevada Legislative Subcommittee Rejects Study on Telephone-Service Competition

Posted on: Monday, 30 August 2004, 06:00 CDT

Aug. 28--A legislative subcommittee refused to accept a study on telephone service competition and subsidies on Friday because consultants were unable to obtain data from unregulated companies.

The telecommunications subcommittee, which met by teleconference at the Sawyer Building and in Carson City, also voted unanimously to solve the problem in the future by asking for a bill that would treat information from these companies as confidential and use them to compile public reports for analysis of the telephone market.

The subcommittee debated a 78-page report from Robert Loube, economic research director for Rhoads & Sinon, about competition and subsidies in the Nevada telecommunications industry.

After hearing complaints from Sprint, SBC Nevada and Cox Communications about the report, the committee voted to refuse to accept the report. Assemblyman David Goldwater, D-Las Vegas, dissented.

State Sen. Randolph Townsend, R-Reno, motioned to reject the report because the consultants were unable to get data from cable television companies, competitive local telephone services and wireless phone services that are not regulated by the state.

"It's not their fault," Townsend said.

"I think the consultants did the best they could," agreed state Sen. Warren Hardy, R-Las Vegas. The report is complete but "based on incomplete data."

Townsend also motioned to introduce legislation that would provide confidential treatment to data from unregulated companies so they would cooperate with analysts in compiling statistical information about telecommunication markets in Nevada.

"I could care less if the (company) names are blacked out. I just want to know what the numbers are," Townsend said.

Despite a lack of information from unregulated companies, the consultants gave legislators an overview of telephone service subsidies in the state.

Their report showed that the monthly cost per telephone line ranges from as high as $2,800 in one SBC Nevada rural area to $440 in one Sprint rural area, according to information filed with the FCC. The average for Sprint is $13.44 a month; for SBC, $21.69.

Customers pay more than it costs for telephone service in urban areas and less than it costs in rural areas, the report explained.

"This type of subsidy is sustainable only in a monopoly setting. Once competitors are allowed into the market, they have a tendency to enter the urban markets where rates are above costs," the study concluded.

That eats into the former monopoly company's profits, the report suggested.

Federal law requires telephone companies to provide phone services at comparable rates in rural and urban areas, the study stated. However, one state, Wyoming, has determined that comparable doesn't mean an equal price and charges rural customers more.

Regulators can change the rates to reflect costs but that might drive rural residential customers to drop phone service and may violate federal law, Loube said. Or the state could use its universal service fund to support rural service.

However, the Federal Communications Commission is considering eliminating fees long-distance carriers pay when an interstate caller uses a local phone company's lines to reach one of the local company's customers, the report explained.

The loss of long-distance access fees could cause local telephone companies to request more state funding under the so-called Universal Service Fund. Only one company, Humbolt Telephone Co., receives state universal service money and is expected to get $186,000 this year. If other phone companies request some of these funds, the Universal Service rate would need to be increased on customer bills, according to the study.

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SBC, FON, COX,

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