Senate votes to deregulate AT&T rates

TOPEKA —The state Senate on Thursday approved a bill to deregulate AT&T phone rates that state consumer advocates say could lead to higher bills for the poor and elderly.

Most phone services and bundled packages already are deregulated, but single-line and government-subsidized "Lifeline" services are covered by price-cap regulations and rates can rise each year only by the amount of increase in the Consumer Price Index.

Substitute for Senate Bill 72 would change that, to allow AT&T to raise its prices as much as it wants.

Company officials and legislators backing the bill say that competition and market forces will keep rates reasonable in urban areas.

The bill also includes a provision to ensure that rural customers in markets where there is no competition won't pay more than urban residents. At present, rural single-line customers pay a dollar less a month.

But officials of the Citizens' Utility Ratepayer Board, the state agency that advocates for residential and small-business customers, say the change will probably result in higher rates for poor and elderly customers.

David Springe, chief consumer counsel for CURB, said the typical single-line customers are older individuals who just want the ability to talk to relatives and friends and possibly call 911 in an emergency. They don't need Internet access or add-on phone services such as caller ID, call waiting and conference calling.

He said that's why CURB has fought to keep price caps on basic single-line service, but SB 72 would "fundamentally allow AT&T to raise rates as high as they feel they need."

He said the likely scenario would be for the company to raise its rates to the point where there would be little difference in cost between basic service and a low-level bundled package of services.

Setting aside taxes and fees, basic phone service in Wichita costs $16.70 a month. AT&T's lowest-priced service bundle, which includes call-waiting and caller-ID, is $23.

If that is deregulated, "you get forced into buying stuff you don't need for more than you want to pay," he said.

Customers who qualify for Lifeline rates also would probably see their out-of-pocket costs rise, Springe said.

The basic guideline to qualify for the program is a household income of 150 percent or less of the federal poverty level. State and federal governments provide subsidies that result in a current Lifeline rate of $4.43 a month.

Springe said the problem with SB 72 is that if AT&T raises its rates, the subsidy will stay the same and the consumer will see an increase.

Cara Sloan-Ramos of the Kansas Corporation Commission, the state's utility regulatory agency, confirmed that to be the case.

Aaron Catlin, a spokesman for AT&T, said an increase in single-line phone rates would not automatically mean an increase in Lifeline rates, which could be kept at the current level.

He also said in many areas, other companies, including cellular phone providers, also offer Lifeline services.

"If AT&T raised rates willy-nilly, there are other people who would come in behind that" to compete, Catlin said.

Springe said the reality is that in the residential market, phone companies compete fiercely for high-dollar customers, who pay about $120 a month for bundled packages of phone, Internet and TV services.

But when it comes to low-cost basic service and Lifeline, "no one is competing to provide that."

Key senators said changes could still be made.

Sen. Mike Petersen, R-Wichita, carried the bill on the Senate floor on behalf of the Utilities Committee.

He said he had relied on assurances from AT&T and legislative staff that Lifeline costs would not change if the bill passed. He said he would do more research on that and could work to amend the bill in a conference committee if it passes the House.

Petersen and Majority Leader Jay Emler, R-Emporia, who also serves on the Utilities Committee, said they don't want Lifeline rates to go up as a result of SB 72.

"It's not the intention," Emler said.

Added Petersen: "That's the whole purpose of Lifeline, is they can't afford it (phone service) anyway."