John Higdon <john@zygot.ati.com> (05/04/91)
If this is not reaching for justification, I do not know what is:
[quoted from today's AT&T's Newsbriefs]
BELL DEBATE -- ... In 1990, Congress [passed] the Americans with
Disabilities Act. The law provides that telephone companies ensure
that people ... who use TDD devices have the same access to the
telephone network that others do [but] it ignored the needs of people
who do not use TDDs. That's why legislation sponsored by Sen. Ernest
Hollings (D-S.C.) to allow the seven [RBOC]s ... to enter research and
manufacturing, is so important. ... Lifting the [MFJ] restrictions
would give the Bells ... incentives to invest in their networks and
would spur development of new products such as "prescriptive hearing
service," that would tune an individual's telephone line to
accommodate hearing loss. ... [Frank Bowe, college professor],
Viewpoints NY, p. 119, New York Newsday, 5/2.
[end quote]
Does anyone imagine that CPE vendors and manufacturers cannot come up
with equalization for a phone line and provide devices for the hard of
hearing? What a lame reason for supporting Hollings LEC giveaway.
Ernest Hollings' bill allows the RBOCs to manufacture telephone
equipment in direct competition to the current marketplace suppliers.
All of the concerns about cross subsidization aside, the time has come
for the RBOCs to face the reality that if it is competition they want,
it is competition they will get. There is no stretch of fairness that
dictates that LECs can compete in the equipment business while others
are barred from competing in the dial tone business.
The RBOCs have had a soft, cushy, cash cow long enough. But rather
than use the obscene profits from this guaranteed money-making
business to reduce costs to the public, RBOCs such as Pac*Bell want to
parlay this wealth into vast empires. Using creative accounting
techniques, it is little trouble to siphon off money from the
regulated side of the operation to fund vulturistic practices on the
non-regulated side (and convince brain dead PUCs that regulated rates
need to be increased in the process). NYNEX not so long ago showed us
how easy this is to do.
After carefully considering the various arguments pro and con from
many on this forum, as well as others, I have become convinced that
competition will in the short term and possibly in the long term
result in the massive screwing of the average and even not-so-average
telephone user. The beneficiaries of LEC competition will be those who
can bypass anyway. Those who cannot bypass (you and me) would be stuck
with subsidizing a futile attempt by the regulated LECs to hang on to
the major customers.
My alternative suggestion is to restructure the MFJ so as to forbid
any entity that owns a regulated LEC (or group of LECs) from engaging
in any other related business. It is hard to shed crocodile tears for
Pacific Telesis, who prints full page ads crying about how it is
prohibited from offering all sorts of space age services, when it is
operating a regulated monopoly that is quaranteed to make a specific
rate of return. No gambles, no risks, just recession-proof, easy
money.
If this isn't enough for the current operators of local telephone
networks, then maybe they should sell to yet to be created
corporations that would be happy to run such a focused enterprise. If
Pacific Telesis wants so badly to compete in the equipment and
information services markets, then perhaps it could sell Pacific Bell
to a group of investors whose purpose would be to run the best
regulated monopoly it could.
What is wrong with that, you say? The whole point of Pacific Telesis
becoming involved in the equipment and other markets would be to use
its advantage in owning the local network. Take away that advantage
and you would find that this burning desire to manufacture and provide
other services would suddenly dissipate.
No amount of accounting safeguards can prevent deleterious cross
subsidization. And Mr. Hollings' bill contains not even a pretense of
provisions to protect the consumer. If this bill becomes law we will
be on the road to a return to those thrilling days of yesteryear. But
instead of Ma Bell, we will have all of the Mothers Bell. What they
may lack in regulatory clout will be made up for with financial might.
It may be time to break up the breakup.
John Higdon | P. O. Box 7648 | +1 408 723 1395
john@zygot.ati.com | San Jose, CA 95150 | M o o !ms6b+@andrew.cmu.edu (Marvin Sirbu) (05/06/91)
In several recent messages John Higdon has asserted that Pacific Bell is "guaranteed" a cushy rate of return. While historically that was true, it is no longer true as of 1991. Both at the State of California level and at the Federal level, Rate of Return (ROR) regulation has been replaced by a system of price caps. The price caps have been set initially at a level which would guarantee a rate of return of 11 - 13%. However, the cap is AUTOMATICALLY cut each year in real terms by 4.5% (Federal) or 6.5%(State). Thus, unless Pacific Bell is continually lowering its costs by at least that much, it will find itself making less than the initial 11-13%. In 1988 Nynex agreed to a price cap plan where it promised to cut rates in real terms at the same rate as inflation -- about 4.5% per year (What it actually agreed to was to freeze prices in nominal dollars which amounts to the same thing.) By the end of three years its rate of return had dropped to about 8%, or less than you could get by buying a truly no-risk Treasury Bond. Nynex was unable to meet the productivity target it had agreed to with the NY PSC and saw its profits drop substantially. Now before you laugh and say "Any fool should be able to cut prices by 4.5% per year given the rapid improvements in technology," remember that as technology costs drop, the remaining labor costs (e.g. outside plant repairs, operator services, etc.) become a higher and higher percentage of the total. Thus, further improvements in technology have less and less impact on total costs. I'm sure that there is plenty of slack at Pacific Bell so that it can achieve 6.5% reduction in real terms for a few years. It will be interesting to see for how long they can keep it up. Marvin Sirbu
John Higdon <john@zygot.ati.com> (05/07/91)
Marvin Sirbu <ms6b+@andrew.cmu.edu> writes: > In several recent messages John Higdon has asserted that Pacific Bell > is "guaranteed" a cushy rate of return. > However, the cap is AUTOMATICALLY cut each year in real terms by 4.5% > (Federal) or 6.5%(State). Thus, unless Pacific Bell is continually > lowering its costs by at least that much, it will find itself making > less than the initial 11-13%. And guess who wrote this procedure in general and in detail. And then fought tooth and nail, making promises that still have not been kept to convince public opinion and the regulatory bodies to embrace it. Currently, the profits are obscene under the price cap regulation. Bells all over the country have blown vast portions of labor forces out the door. Labor costs have dropped DRAMATICALLY and equipment costs and maintenance have dropped as well and yet -- and YET -- the average LEC customer is paying MORE for his service than five years ago. It does not take a master mathematician to uncover the fact that RBOCs are cleaning up. > In 1988 Nynex agreed to a price cap plan where it promised to cut > rates in real terms at the same rate as inflation -- about 4.5% per > year (What it actually agreed to was to freeze prices in nominal > dollars which amounts to the same thing.) Compared to the headroom of the intitial agreement and the real difference between cost and revenue this is chump change. > By the end of three years > its rate of return had dropped to about 8%, or less than you could get > by buying a truly no-risk Treasury Bond. Nynex was unable to meet the > productivity target it had agreed to with the NY PSC and saw its > profits drop substantially. As determined by whom? When was the last time you ever heard of a full audit of an LEC by either legislative or regulatory entities? How short your memory is (or how gullible you are)! Nynex, if you will recall, got zinged for its "creative accounting" (which was so blatant that it did not require a full audit) in which it sold equipment to itself via its unregulated division at list-plus prices. This had the effect of showing a substantial expense on the part of the regulated side, reducing profits considerably. Where did all this ratepayer money go? To the unregulated division, of course. And this was just something one RBOC got caught at. This is most likely the tip of the iceberg in regards to telco scams. It might even have been done so that Nynex would be caught and would take the heat (and light) away from some more nefarious schemes. BTW, if Nynex told the PUC-equivalent that it could no longer survive under the current regulations, do you suppose it would be told "too bad"? > I'm sure that there is plenty of slack at Pacific Bell so that it can > achieve 6.5% reduction in real terms for a few years. It will be > interesting to see for how long they can keep it up. If the Hollings bill passes, it should survive indefinitely and then some. The telephone company will just take care of us as it used to. In whatever manner it chooses. John Higdon | P. O. Box 7648 | +1 408 723 1395 john@zygot.ati.com | San Jose, CA 95150 | M o o !
Jeff.Scheer@uunet.uu.net (Jeff Scheer) (05/13/91)
As a disabled person, it would appear to me that Sen. Hollings is being kept by the RBOC, to serve their "warped" desires. It sounds like B*lsh*t to me! Just like the Tammy Faye Baker School of Cosmetology that recently opened here. JJ The .COMmand Center (Opus 1:5010/23)