Some Utah consumer groups have a nightmare about telephone deregulation, fearing it will trigger a price war that US WEST cannot lose, actually stifling competition instead of fostering it.
The specter is that once competition starts in a few places, telephone users elsewhere in the state would pay higher bills so US WEST could undercut the competition.The issue came up before the Public Service Commission on Tuesday because the new deregulation law will allow US WEST to have "pricing flexibility" to compete whenever a new company begins offering services now available only through US WEST.
US WEST will operate under "rate of return" regulations for the next couple of years. Apparently it will be guaranteed a 12 percent return regardless of how much it lowers prices in certain high-competition areas.
Two potential competitors have requested certification to provide local phone service in Utah: Electric Lightwave Inc., which wants to serve a corridor from Ogden to Provo; and Phoenix Fiberlink of Utah, which seeks statewide authorization.
Before US WEST gets pricing flexibility, four conditions must be met, according to PSC Chairman Stephen F. Mecham. Competition must be up and running and interconnections must be available between the companies' lines.
"My concern and fear is that . . . one telephone could be installed in the middle of the valley (by a new competitor) and literally deregulate the entire state," Rep. David Bresnahan, R-West Jordan, told the PSC.
Mecham said that was not the intention of the Legislature.
"We have to be very cautious with every step that we take so that we don't inadvertently give a monopoly the chance to regulate itself," Bresnahan continued.
US WEST lawyer Molly Hastings said the statute doesn't give the PSC an option: pricing flexibility shall be granted when certain conditions are met.
"I believe that US WEST also has a responsibility to act in the best interest of the people of this state," Bresnahan replied. Otherwise, the company would be inviting further legislation.
Stan Harbuck, a Salt Lake man who said he was representing himself, said, "To unleash the strength of such a mammoth corporation (as US WEST) . . . would not create the right setting" for better telephone service.
Claire Geddes, director of the Utah Chapter of the H. Ross Perot organization, United We Stand America, reminded the PSC of the debacle of collapsed financial institutions that followed deregulation of the savings and loan industry in the 1980s.
"We are very, very concerned that the consumer be protected in these issues," she said.
If a new company gets a certificate to operate throughout the state, but can't actually compete in it, that would allow US WEST to have pricing flexibility, she said. "Am I right?" she asked.
"That's the argument," replied Mecham.
Kent Walgren, an assistant state attorney general who represents the Committee of Consumer Services, said the committee filed objections to the language of the pro-posed certificates.
After the session, US WEST spokesman Duane Cooke stressed that the company wants to foster competition.