SBC request for rate hike questionable

Published 12:00 am Friday, June 4, 2004

Tribune editorial staff

Telephone customers in Ohio may soon get a rude awakening if the Public Utilities Commission of Ohio grants SBC's request to increase rates that SBC

charges its competition to use phone lines and equipment.

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SBC has asked the PUCO to double these wholesale rates from $14 to $28. In March, PUCO voted 4-1 to temporarily hike SBC's this fee by $2 to $3, depending on location - an increase of 14 to 20 percent. It granted this request after less than a week of deliberating and did not hold public hearings which would have granted SBC's competitor's the opportunity to speak out against the rate increase.

In November, the PUCO will make a final decision on the $28 request.

The PUCO's decision means that SBC Ohio's wholesale price - now the highest in the company's Midwest territory - is higher than the retail price of $14.25 it charges its own customers.

In essence, SBC is trying to price its competition out of Ohio. Other providers cannot compete if the line use fee increases - it simply would not be economically feasible. As a result, other phone companies are going to have to charge more for its services or eliminate them. Last month, AT&T said it will stop offering its popular Call Plan Unlimited and Unlimited Plus local service plans to new Ohio local residential customers and raise rates, effective for those customers already enrolled in the plans.

Perhaps more troubling is the fact that SBC is not asking for these increased rate out of necessity. In fact, Fortune 500 lists the company as the ninth most profitable company in the United States with more than $8.5 billion in profits in 2003. Overall, SBC ranks 33rd with $40.8 billion in revenues.

By its own admission, SBC has acknowledged its operating costs have declined. At the UBS Eighth Annual Global Communications Conference in November, SBC's CFO Randall Stephenson said the company expects "productivity projects to deliver cost savings of $1.3 billion run rate by 2006." So why is a rate increase needed?

The PUCO needs to determine if the rate increases are justified now. If they wait until November, most, if not all, of SBC's competitors will have left the state.

The PUCO owes it to Ohio consumers to make sure this does not happen.