US WEST announced Friday it is selling its local telephone exchange properties in Ephraim, Mt. Pleasant, Vernal, Price, Hanksville, Coalville, Wendover and surrounding communities to independent Utah telecommunications companies.
The decision is a response to economic challenges the company faces from competition focused on US WEST's most lucrative markets along the Wasatch Front. "It's a changing marketplace. You've got to invest where the competition is; and so far all of the competition is along the Wasatch Front," said spokesman Michael Frandsen.The spinoff will require approval of the Utah Public Service Commission, which already is dealing with US WEST's proposed merger with Denver-based Qwest Communications International.
The announcement ironically comes one day after US WEST protested loudly about a new Federal Communications Commission ruling that will change the distribution of federal subsidies for telephone service in rural and high-cost areas. US WEST currently receives no universal service subsidies for its Utah operations but gets $15 million annually elsewhere in its 14-state service area. US WEST said it expects those subsidies to shrink soon to $3 million, all of which would end up in Wyoming.
Similar US WEST sell-offs in other states have brought protests from consumer watchdog groups who say the company is more interested in its profits than its customers. "We can no longer be all things to all people," Frandsen said.
Friday's announcement came after the stock market closed, leaving the sell-off proposal to steep over the weekend with a flurry of reaction, on the market and elsewhere, expected Monday.
Companies purchasing the telephone exchanges include Manti Telephone, Central Utah Telephone, UBTA Communications, Emery Telephone, All West Communications and Skyline Telecom, which is a subsidiary of Central Utah Telephone. Frandsen said all are currently doing business in the state.
"We have been very careful in selecting highly qualified buyers. The companies we're selling to don't face the same competitive pressures we do. They also have access to state and federal funding, which helps offset the cost of serving a rural population," Frandsen said.
"The telecommunications companies have the expertise in delivering excellent telecommunications services to the areas they'll serve," said Ted Smith, US WEST vice president for Utah. Smith has been vocal recently about the fierce competition the company faces from newcomers into US WEST territory, including long-distance giants like AT&T and Sprint. He has also been vocal about criticism US WEST has received from consumer groups in other states who criticize the Baby Bell for spinning off rural exchanges.
"Even after factoring in the small percentage of access lines we've sold over the past six years, we still remain the largest provider of rural phone service in the country," Smith said. The proposed sale announced Friday accounts for 3 percent of Utah phones currently carrying a US WEST dial tone.
US WEST employees are represented by the Communications Workers of America. Gail Metcalf, president of the Salt Lake Local 7704, said she has concerns about the spinoff because of employees who would become eligible for retirement shortly after the spinoff could be completed. Also, union members are set to see a 9 percent pension increase in January 2001. "I'd like to see the company step up to guarantee these folks, in Vernal, Price and Roosevelt, that this increase will be available to them."