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BellSouth Wants End To Oversight In North Carolina

Company Claims "Vibrant Competition" for Local Phone Service

September 5, 2006

• BellSouth Wants End To Oversight In North Carolina • Verizon Joins BellSouth in Retreat From Unexplained New DSL Fee • FCC Nudges BellSouth Into Giving Up New DSL Fees • AT&T Plans BellSouth Acquisition --- • BellSouth Complaints • DSL Complaints

Those who thought BellSouth had learned its lesson after the debacle of its mysterious "regulatory cost recovery fee" should think again.

The telecom giant is petitioning the state of North Carolina to end all regulatory oversight on its pricing, enabling it to set prices without any controls or restrictions.

BellSouth filed its petition with North Carolina's Utilities Commission, seeking to end all regulatory processes on the grounds that "market forces" would keep the pricing schemes in line with consumer expectations, and that customers had many more choices for communications services than they did when the regulations were enacted.

Robert Gruber, director of the Commission's Public Staff, said he would contest BellSouth's request, on the grounds that BellSouth holds such a large portion of the residential service market that eliminating price controls on local service would not be in the public interest.

"The lack of viable competitive alternatives to basic local service will enable BellSouth to increase the rates for those customers by forcing them into higher-priced bundled offerings or off the network completely," Gruber said.

BellSouth has already won looser restrictions on its pricing in other Southern markets, including Alabama and Mississippi, and already enjoys the right to raise residential phone service prices by 10 percent in North Carolina without the Commission's approval.

Company spokesmen for BellSouth claim that "vibrant competition" for phone service exists throughout the region, pointing to BellSouth's loss of customers and market share to rivals such as Alltel, Time Warner, and Voice over Internet Protocol (VoIP) companies such as Vonage.

Not so, said an editorial in the Charlotte News-Observer. The state has spotty wireless coverage outside major urban areas, and Internet phone services usually require expensive "bundled" packages of broadband service as well, the editors wrote.

A recent study by the Government Accountability Office (GAO) found that it was difficult to measure the actual levels of broadband penetration, because of the reliance on subscriber ZIP codes, rather than infrastructure development.

The report also found that the major telecom companies opposed explicitly expanding the Universal Service Fund (USF) to cover broadband access. The USF is the chief funding vehicle for communication development to rural and low-income areas.

BellSouth's Bad Boy Behavior

It was the USF that earned BellSouth its most recent slap on the wrist. The company, along with fellow telecom giant Verizon, had petitioned the FCC for "regulatory relief" from paying into the USF fund for standalone DSL customers.

But as soon as the companies won their petitions and agreed to stop passing on the USF charge to customers, they instituted mysterious new fees that almost precisely matched the old USF fee dollar-for-dollar.

After an outcry from consumers and threats from the FCC to investigate the new fees, both BellSouth and Verizon agreed to drop them, reimburse customers who had already been charged, and pass the USF savings onto consumers.

Of course, BellSouth and the other traditional local telecom providers are quick to seek government regulation when it serves its interests.

BellSouth has ardently opposed development of municipal wireless services in regions where it holds dominance and went so far as forcing New Orleans to "dumb down" the speed of its free municipal Wi-Fi service after the telecom complained it was losing business.

Observers are skeptical about BellSouth's claims of sufficient market competition in North Carolina.

A commenter on tech Web site Broadband Reports lamented the actual state of competition in their region, saying that "[i]n North Carolina, specifically the Triangle region, there is no other [provider in] the area that competes with them on a like for like basis."

"The only reason they want to do this is to hike prices so that low income families can no longer afford service," one posting said.

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