LANSING – Phone companies no longer need state approval to change their rates for local phone service to businesses and residents throughout most of the Detroit area, Flint, Grand Rapids and Lansing.
The decision Thursday by the Public Service Commission, on a 2-1 vote, takes effect 45 days after all affected telecommunication providers complete notifying customers of the change. The move (U-14323, U-14324) is a major victory for SBC Michigan, which requested the deregulation of rates, and prompted sharp criticism from competing telephone companies.
The Detroit area exchanges essentially encompass Macomb, Oakland and Wayne Counties along with a sizeable portion of Washtenaw County.
Residents in the following exchanges are affected by the decision: Ann Arbor, Auburn Heights (which is the technical name although it would appear to apply to Auburn Hills), Birmingham, Center Line, Commerce, Detroit, Drayton Plains, Farmington, Flint, Grand Rapids, Lansing, Livonia, Mount Clemens, Northville, Plymouth, Pontiac, Rochester, Romulus, Roseville, Royal Oak, Southfield, Trenton, Troy, Utica, Walled Lake, Warren, Wayne, West Bloomfield, Wyandotte and Ypsilanti.
Businesses affected by the move include those same exchanges except for Detroit, Royal Oak and Southfield. The PSC already granted SBC a one-year trial deregulation in January of rates for businesses in those exchanges that ends January 6, 2006.
Commissioners Peter Lark and Monica Martinez voted for deregulation. Commissioner Laura Chappelle agreed with the commission’s decision to deregulate prices for businesses in the affected areas, but disagreed with the lifting of regulation on residential rates.
“It is our hope that Michigan phone companies affected by this order will use this new authority to be more responsive to the pricing needs of their customers, and make Michigan a better place to live, work and grow business,” Lark said in a prepared statement.
But Dave Waymire, a spokesperson for the Michigan Alliance for Competitive Telecommunications, which represents consumers and the competing phone companies, called the decision “obviously premature.” The commission relied on the rise of consumers dumping their traditional phone line for wireless and Internet phones when those providers remain sporadic throughout large portions of the affected exchanges, Waymire said.
“Competition is not growing,” he said. “It’s shrinking because of the uncertain legislative and regulatory atmosphere.”
Mr. Waymire’s reference to an uncertain atmosphere was a nod to the status of the Michigan Telecommunications Act, which expires at the end of this year.
The decision shows the need for the Legislature to extend the telecommunications law as is to ensure “real” land line competition, he said. Changing the existing law to favor SBC “would leave millions of customers to the whims of prices set by a deregulated monopoly,” he said.
To achieve its goal of deregulating rate-setting, SBC under law had to persuade the commission that more than one provider existed to provide service within an area and that a series of additional criteria to measure competition have been met.
The decision boiled down to commissioners’ differing interpretation of language in the Michigan Telecommunications Act that allows competition if “there are three or more providers of facilities-based basic local exchange service throughout the competitive market.”
Lark and Martinez held that “throughout the competitive market” meant three competing companies within the group of exchanges. Chappelle dissented, saying the language means three competing companies in each exchange.
The two commissioners cited evidence presented that there are 63 competing phone companies accounting for 36 percent of all residential local phone service and 37 percent of all business local phone service in the affected exchanges. They also pointed to evidence of rising market share among competing carriers and falling share for SBC.
Lark and Martinez called the competing companies market share “noteworthy.”
“The commission anticipates that a result of this declaration will be gains by consumers due to the availability of more efficient pricing options,” they wrote. “Further, the commission also anticipates that consumption and investment decisions flowing from this determination will allow for the telecommunications market in Michigan to flourish and expand.
The two commissioners said the PSC would “remain vigilant” in its oversight of competition and would reconsider Thursday’s decision if conditions warrant.
Chappelle, in her dissent, wrote that a “strict interpretation” of the word “throughout” would require the rejection of SBC’s request because three or more competing companies do not exist in each exchange. Voicing concern about the vulnerability of residential customers, she said evidence presented shows residents in the exchanges outside of Detroit, Royal Oak and Southfield particularly lack competing companies.
“Indeed, in some populous communities, there are none,” she wrote.
SBC Michigan spokesperson Steve Kauffman said consumers would benefit from the decision because it would allow them to pick prices set by the market, not government regulation.
Kauffman said “nothing is being planned right now” on price increases or decreases, but denied assertions from competing companies that SBC would exorbitantly raise its rates.
“No provider will survive if they raise prices beyond what companies are charging in their marketplace,” he said.
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