Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, December 18, 1993 TAG: 9312180128
SECTION: VIRGINIA PAGE: B2 EDITION: STATE
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE: LENGTH: Medium
C&P Telephone Co. of Virginia expressed immediate disappointment with the SCC's decision to alter the plan by reducing the profits it will allow the company to earn on phone service and by re-regulating some Yellow Pages profits.
The 1993 General Assembly gave the commission the authority to adopt alternative forms of utility regulation if it felt the change was in the public interest.
C&P President Hugh Stallard says the SCC's action will deprive C&P of new revenues and improved efficiency the company would get from its aggressive investments under the experimental regulatory framework.
"We will be penalized for believing in the plan and making it work," Stallard said.
But a spokesman for the SCC said the commission was acting to preserve the goals of the plan while giving other parties, including cable television companies, an opportunity to propose other possible regulatory schemes.
The new plan announced Friday is temporary and could be changed further after a commission hearing in April, SCC spokesman Ken Schrad said.
Under the experimental plan, C&P and the four other large telephone companies in Virginia were authorized to market services for which they have competition without having to file rate requests with the SCC. Besides Yellow Pages such services include inside wiring, mobile services and paging.
The companies' profits on those and other competitive services are not regulated under the current plan, recognizing the growing competitiveness in the communication industry.
The modified plan, developed by the commission following a yearlong review of the experimental plan, requires C&P and the other companies to apply 25 percent of their revenues from Yellow Pages advertising sales toward their allowed profit on local telephone service. The idea is to use that revenue to help bring down the cost of basic phone service for the company's customers, Schrad said.
The commission also has lowered the profit that the company can earn on its basic phone service from 12-14 percent to 10.5-12.5 percent to reflect new market conditions. The proposed profit range is based on the rate for 30-year Treasury bonds with certain risk factors taken into account.
"We are extremely disappointed with the commission's decision," C&P's Stallard said. "Although the commission finds that the experimental plan has been successful, it goes on to modify it in ways which will remove the positive incentives which created a success."
The plan had resulted in reduced rates, new services, improved customer satisfaction and an investment by C&P of over $1 billion, Stallard said.
C&P, he said, cut rates by $37 million at the start of the plan, another $10 million during the plan and had proposed another $25 million reduction next year because of the incentives provided by the plan. The company has not raised its rates for basic phone service since 1984.
"We have delivered lower prices, more products, better customer service and a more modern network," he said.
In response to Stallard's reaction, Schrad said it should be considered that some parties, including television cable companies and consumer groups, have threatened to challenge any proposal to make the experimental plan permanent.
The commission's decision continues the structure of the experimental plan, while giving those who might propose other plans a chance to do so, Schrad said.
Other companies participating in the experimental plan are Contel of Virginia, GTE South, Central Telephone Co. of Virginia and United Telephone Southeast.
Memo: shorter version ran in the Metro edition.