State Rebuffs Us West With Rate Cut Commission Calls Service ‘Substantially Worse’ Than A Few Years Ago
Washington regulators Thursday stunned US West Communications Inc. by cutting, not raising, the cost of telephone service for most state residents.
US West says residential customers in Spokane will pay the second lowest urban telephone rate in the nation after the cut.
In making the ruling, the Washington Utilities and Transportation Commission agreed with consumers who have criticized US West for cutting customer service to shore up profits.
“The commission finds that the company is providing service that is substantially worse than that which the company provided only a few years earlier,” the order by the commission says. “The company’s inability to meet its basic service obligations hurts individual ratepayers and it hurts the state economy as a whole.”
The commission imposed a $10.50 monthly rate for basic residential service, effective May 1. That’s $1 below the current rate in Spokane.
Business rates also will drop.
The telecommunications giant had sought a monthly charge for residential service of $15.75 per month this year, increasing to as high as $26.35 per month in some areas by 1999.
US West can request a rehearing or appeal the commission ruling in a state court.
The increase was the first sought in Washington by US West in 13 years. The Colorado-based company serves 1.5 million residential customers in the state and about 500,000 business lines.
US West spokesman Harry Grandstrom said the commission order fails to recognize competition in telecommunications.
“It appears to be somewhat punitive,” he said.
But the commission said the lower rate was appropriate, considering the service customers have been receiving.
Service complaints tripled from 1994 to 1995, according to commission records, and the pace so far this year has not abated.
In its order, the commission directs US West to provide cellular phones and $140 per month for as long as necessary to customers who wait 30 days for new service.
Commission accounting adviser Merton Lott said the company was also granted a slightly lower return on its investment because of its service problems.
Overall, the commission ordered US West to roll back annual revenues by $91.5 million, a sum that will also allow for reductions of about 20 percent in the cost of long-distance calls within Eastern Washington.
Business rates will decrease by about as much, depending on the number of lines.
Grandstrom said company officials were reviewing the 137-page order and would not know until next week whether they would appeal.
“We are very concerned and rather stunned,” he said.
He challenged commission findings US West was investing money earned in Washington elsewhere in its 14-state service territory.
Improvements worth $337 million were planned in the state this year, he said.
But Thursday’s order will reduce US West’s return on investment in Washington to about 2 percent from 6 percent, Grandstrom said.
He said that may be too low to justify additional network upgrades.
The commission calculates the return at around 10 percent, but Grandstrom said those calculations include “phantom revenues” from items like Yellow Pages advertising.
He conceded that explosive growth in areas like Spokane had created service problems, but added that of the 500,000 new installations made statewide in 1995, only 3 percent were delayed.
“We need cash to improve that,” he said.
Jim Bellessa, Jr., an analyst with D.A. Davidson in Great Falls, noted the revenue reduction ordered by the commission represents almost 1 percent of US West’s total revenues of $9.5 billion.
With that much at stake, he predicted an appeal.
A spokesman for the American Association of Retired Persons, which had been an outspoken critic of the US West application, was jubilant.
“We put quite a bit of work into this,” said Jason Erksine. “A phone system is very important to older people.”
Greg Green, president of Nextlink, also applauded the action.
US West, he said, was trying to bolster its position in the competitive market for business customers with subsidies extracted from residential customers who have no alternative telecommunications provider.
Nextlink is building its own network in downtown Spokane, and a second company, GST Lightwave (WA) Inc., Monday was awarded a franchise to do likewise by the Spokane City Council.
GTE Northwest, which provides local telephone service in North Idaho, charges residential customers rates ranging from $10.25 to $14 per month, excluding extended area fees.
Rates were adjusted two months ago, but the changes did not affect revenues to the company, according to Gary Richardson, a spokesman for the Idaho Public Utilities Commission.
, DataTimes ILLUSTRATION: Graphic: Utilities commission says no to US West