Qwest deregulation request denied in Idaho – PUC ruling addresses issues of competition

Qwest Communications International Inc. sees the proliferation of cell-phone providers as a threat to its traditional phone service, but the Idaho Public Utilities Commission doesn´t share that view.

Ken Dey
The Idaho Statesman

On Monday the commission denied company request that would have allowed Qwest to increase or decrease basic local exchange rates in seven Idaho cities without commission approval.

Qwest told the PUC in summer that its business was being impacted by cell phone providers. Qwest sought permission to deregulate basic phone service rates to better compete in Boise, Meridian, Nampa, Caldwell, Twin Falls, Pocatello and Idaho Falls.

Qwest officials said Monday they were disappointed by the commission´s ruling.

“It´s frustrating when the government tells us that cellular telephones are not replacing traditional wire line telephones,” said Jim Schmit, president of Qwest in Idaho.

“We lose wire line (land line) local telephone service customers due to cellular competition every day, and outdated government regulation is restricting our ability to effectively compete,” he said.

In order to gain approval for the deregulation, Qwest had to prove that cell phone companies provided what state law calls “effective competition.”

The company also had to show that cell phones are “functionally equivalent” to land-line service.

“The commission was not persuaded by Qwest´s evidence that cellular service effectively competes for local service customers of Qwest´s wire line service,” the commission said in a statement.

“On the evidence presented to us, we cannot find that cell phones are functionally equivalent and competitively priced to Qwest´s local service.”

The commission said its conclusion is similar to one reached by the Federal Communications Commission in its Aug. 21 Triennial Review Order, which stated, “Neither wireless nor cable has blossomed into a full substitute for wire line telephony.”

The commission also cited a public interest concern over the potential for rate increases by Qwest. “Nowhere in the record does Qwest contend it is considering lowering its basic local service rates as the result of competitive pressure it currently faces from cellular service,” it said.

In August, while the commission was deliberating the company´s request, Qwest offered to forego any rate increases through 2004 and limit rate increases for residential customers to $6.60 a month through 2007.

Schmit said the evidence was overwhelming that cell phones are having a huge impact on the company´s business.

“With over a half million cell phones in Idaho, and a declining number of wire lines, the numbers speak for themselves,” Schmit said.

Though Qwest officials did not release the exact number of lines they have lost, company spokesman Mike Reynoldson said the number is significant.

“Over the last several years, we´ve seen the number of wire lines decreasing in the thousands each year,” he said.

PUC staff estimates that Qwest has lost 14,000 access lines since 2000, but at the same time the company has gained 13,000 high-speed Internet lines.

Qwest also cannot point to the exact number of customers it has lost to cell phones, which the commission said it also factored into its decision to deny the request.

“Qwest candidly admitted it ´never attempted to provide a precise loss of line attributable to wireless competition,´ ” the commission said.

But Schmit said the company did not believe that was a requirement of the Idaho Telecommunications Act, which allows for deregulation if effective competition exists. Schmit said the company has no way to know how many new customers opted for cell phones rather than land-line service.

Qwest has until Nov. 10 to file a petition with the commission for a reconsideration of the ruling. If that fails, the company also could file an appeal to the Idaho Supreme Court.

Schmit said the company is still weighing its options.

Had Qwest gained approval, Schmit said Idaho would have been the first state to recognize cell phones as a threat to wire line companies.

“The traditional monopoly practice of relying on regulation to ensure a profit cannot work and has no place in today´s competitive market,” said Schmit.

“We are not asking for any favors, only the same marketing and pricing ability as our competitors. Then we will sink or swim solely based on our ability to provide value and serve customers,” Schmit said.

To offer story ideas or comments, contact Ken Dey
[email protected] or 377-6428

http://www.idahostatesman.com/Business/story.asp?ID=51921