john@zygot.ati.com (John Higdon) (01/10/90)
My mailbox has been filling up with messages from people who think
that I am being overly mean to Pac*Bell concerning their recent
"modern regulatory changes" that they whisked past the CPUC.
One writer said that my comment about Pac*Bell being allowed unlimited
profits was incorrect; that they indeed had to share with the rate
payers. Well, yes and no. Granted, the wording on the ruling would
indicate that, but who will determine how much of a profit has been
made? Why, Pac*Bell, of course.
There are so many tricks to hide a profit from one subsidiary by
pumping up another that space forbids going into that here, not to
mention the inappropriateness of the group. But let us just say
whenever you have an intentional monopoly, it MUST be regulated or the
public will suffer. Allowing a "rate of return" against the CPI as the
sole standard for regulating a monopoly is most ineffective protection
for the consumer.
This is particularly true when you have a holding company that has as
much diversification as Pacific Telesis. They are now into every form
of electronic communications, including equipment supply. Which brings
up an interesting scam. What would stop a Pacific Telesis supply arm
from buying, for instance, Northern Telecom DMS100s at a steal of a
price (quantity, someone sleeping with someone, whatever) then turning
around and selling those switches to Pac*Bell at full list? And then
when it comes time to compute rate-of-return for Pac*Bell they show
exhorbitant costs for their CO equipment, reflecting a lower apparent
rate-of-return. But Pacific Telesis made the profit at its other
subsidiary, *totally at the expense of Pac*Bell's ratepayers*. Back to
my question: What would stop them? Nothing. They do it all the time.
Now that the PUC isn't watching them anymore, it will be even easier
to get away with it.
Pac*Bell's PR is most effective. I was reminded by some that they
agreed to give up touch-tone charges in this package. Actually, that
was the new PUC chairman's idea. It was an obsession with him to
remove those charges, and Pac*Bell had to agree to it before the PUC
would proceed with the give-away. In my case, it is meaningless.
Touch-tone is included with Commstar II, and if anyone thinks that
Pac*Bell will lower the cost of Commstar II to reflect that then I
have some large artifacts near New York I would like to sell to you.
I hate to be such a curmugeon on this topic, but where in the hell was
the public (and, for that matter, the consumer advocacy organizations
like TURN) when all this was before the PUC? The media spoke of the
whole matter in glowing terms, printing verbatim what the Pac*Bell
spokespeople spewed forth on the subject. The California telephone
ratepayer was taken to the cleaners. Let's hope the good people of
Texas are not taken for a ride by SWB the way we where here in CA.
Remember, Pacific Telesis isn't in business to serve the public; it's
in business to make money--any way it can.
John Higdon | P. O. Box 7648 | +1 408 723 1395
john@zygot.ati.com | San Jose, CA 95150 | M o o !tad@ssc.UUCP (Tad Cook) (01/12/90)
Higdon mentioned something about what would happen if an unregulated subsidiary of a regulated telco bought equipment, and then sold it to the regulated telco at an inflated price. The Wall St. Journal had an excellent article on this on Tuesday, January 11 right on the front page. It looks like Nynex was doing just that...forcing the regulated telco to buy from their unregulated purchasing arm...at inflated prices! This came out in an FCC audit, and the article indicated that other telcos have been doing the same thing. So the rate of return on the telco to the holding company is guaranteed, and any expenses are covered by the ratepayers. The unregulated purchasing arm can sell to the telco at high prices, give the profits to the holding company, and the regulated telco (the ratepayers) foot the bill! Pretty slick! Or as Oliver North would say, "A neat idea!" tad@ssc.UUCP