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AT&T and Georgia Cable Lobby Try to Force Independent Telcos to Raise Rates

Normally, telephone companies looking for a rate increase file a request themselves with state regulators to charge customers more for service. But in Georgia, AT&T, Comcast, and the state cable lobbying group are asking the Georgia Public Service Commission (GPSC) to order two rural phone companies to raise rates because they are not “charging enough” for phone service, when compared with cable telephone services and AT&T.

The Ringgold Telephone Company (RTC) and Chickamauga Telephone Company both argue the action is anti-competitive.

“By forcing [both companies] to increase rates, these competitors are seeking to make wireless and cable companies more attractive to consumers,” says the Don’t Raise My Rate website.

The independent phone companies are vehemently against raising their rates, and executives at both companies are outraged AT&T and the state’s cable companies are literally trying to force the GPSC to order rate increases on residential and business customers.

“It’s totally unprecedented,” Phil Erli, executive vice president at RTC told the Times Free Press.  “It is ludicrous and illogical.”

The Georgia Public Service Commission will decide on Oct. 16 whether the rate increases are justified, following local public hearings Aug. 13.

AT&T, which is driving the campaign to force customers to pay higher rates, says they are pressing the case because both companies unfairly charge substantially lower rates than AT&T does in Georgia.

Peter F. Martin, vice president for legislative and regulatory affairs in Georgia openly admits he wants both companies to charge essentially the same prices AT&T bills its customers in other areas of the state.

“The premise of my recommendation is that [the two phone companies] raise rates to roughly the same levels that are being charged by other local exchange carriers in surrounding areas,” Martin testified before the GPSC. “In other words, my recommendation is that [the two phone companies] increase their own end-user rates to market-based levels comparable to what other carriers are charging their subscribers.”

For customers of Chickamauga Telephone, that would amount to a 42% rate increase on residential customers, 100% on business customers. Customers of RTC would pay 20 percent more for residential service, 37% more for business service.

AT&T claims both companies, in deeply rural Georgia, are tapping into the state’s rural service fund and are receiving some of the largest state-mandated telecom subsidies, which are funded by all of Georgia’s phone companies and ratepayers. But both companies claim they have spent a large portion of those funds repairing damages to their rural networks incurred from a series of tornadoes which hit the area two years in a row.

The state cable lobbying group, the Cable Television Association of Georgia (CTAG) also has a dog in this fight. Comcast Cable, the dominant provider in Georgia, directly competes with both phone companies. They support AT&T’s demands that both phone companies hike their rates. It is not difficult to understand why:

Residential Service With Calling Features:

CHICKAMAUGA TEL TODAY

CHICKAMAUGA TEL

AT&T PROPOSED RATE

COMCAST’S CURRENT RATE

EPB

$31.75

$37.28

$34.95

$22.99

Business Service With Calling Features:

CHICKAMAUGA TEL TODAY

CHICKAMAUGA TEL

AT&T PROPOSED

COMCAST’S CURRENT RATE

EPB

$88.85

$113.30

$49.95

$35.99

(EPB, a publicly-owned provider from nearby Chattanooga, Tenn., also offers service in some areas.)

Chickamauga Telephone executives argue Georgia’s telephone deregulation policies are heavily weighted in favor of huge phone and cable companies and leave independent, rural phone companies with no new revenue opportunities. Chickamauga argues AT&T and the cable industry are using legislatively imposed “unfunded mandates” to win favor and additional profits for themselves and their shareholders, with no resulting savings for Georgia ratepayers, especially in rural areas.

If AT&T and cable operators have their way, both independent phone companies “would be priced out of the competitive market,” and “would soon find [themselves] out of business.”

“If you lived down here and you had a phone with us and your rates went up, how would you respond?” asked Ted Austin, a spokesman for Chickamauga Telephone. “Nobody wants their bills to go up, especially when it’s not something that Chickamauga Telephone is asking for.”

Currently there are 28 comments on this Article:

  1. txpatriot says:

    It would interesting to see how much subsidy each company in Georgia gets on a per-line basis.

    It would not surprise me to see that rural companies get more than urban companies because rural costs are higher. And although the subsidy dollars are basically coming from taxpayers and therefore OUGHT to be public information, individial line costs per carrier are proprietary. So the actual per-line subsidy flow may never be known outside the regulators and recipients.

    And that’s a shame.

    • You can glean a lot of information from the public filings and back and forth linked here: http://www.psc.state.ga.us/factsv2/Docket.aspx?docketNumber=35068

      The me-too stuff from the cable companies pales in interest when compared with AT&T’s silly arguments (and often inaccurate facts). AT&T seems to believe that these rural companies are somehow making a killing sipping from the rural telco fund and somehow undercharging for phone features. One wonders why a giant corporation like AT&T is that interested in two tiny rural phone companies. Their legal bills protesting this are going to end up rivaling the proceeds, because both independents have plenty of expenses rebuilding their networks after tornado damage.

      BTW, the law H.168 they keep talking about in those filings which mandates lower rural telco subsidies was custom-written and lobbied by and for AT&T, so they are using their own bought and paid for legislation as a sledgehammer to argue independent phone companies have to raise rates to match their own. That makes AT&T wireless service pricing look more affordable in comparison, and the cable companies feel the same way. End result, customers are provoked to drop landlines even faster and pay AT&T the higher prices they charge for wireless. That money goes right into AT&T’s pocket.

      AT&T doesn’t bother to mention the hand they played in getting the “reform” measure through the Georgia legislature in their filings, but they are sure willing to leverage every aspect of the law exactly as intended when they helped write it.

      • txpatriot says:

        AT&T may have been premature with its complaint.

        The recent FCC order that reformed universal service basically set a floor for rural companies if they want federal compensation so unless these guys are willing to give up that gravy-train, they will have to raise their local rates anyway.

        And I wonder how the small telcos might be perceived if, instead of saying “Don’t raise my rate” their signs read “Keep my subsidy flowing”?

        Urban ratepayers have subsidized rural ratepayers for years but it sounds like this case is rather extreme.

    • Scott says:

      Hmm so we should be allowing old mega-corporations with all their amassed wealth and political connections to lobby (bribe) government to protect their inefficient and noncompetitive businesses while also passing on the increased cost of services to taxpayers?

      Can’t think of a better plan to plow more financial wealth towards too-big-to-fail businesses and the Wealthy 1%’er’s living large off stocks, increased taxes, and reduced services for the low and middle class.

      • txpatriot says:

        Scott: one could argue that “protecting their inefficient and noncompetitive businesses while passing on the increased cost of services to taxpayers” is EXACTLY what these two rural telephone companies are doing. Isn’t that how a “subsidy” is defined?

        • Scott says:

          Well first off any subsidy they are getting is in place to provide an incentive to provide telephone service in a rural area that otherwise wouldn’t have had it, same as what any telco gets for providing services there.

          The only claim I see if they used additional funds for repairs on lines from several years of Tornado damage.

          Seeing as the rural Telcos are less expensive than AT&T and Comcast, I’m not seeing how they can be considered inefficient or noncompetitive, it is AT&T after all that’s trying to make them more expensive and less able to compete.

          Or are you trying to make a rural vs. metropolitan case against subsidizing necessary services, farming, water, electricity, communications, fire, police, school, roads, etc. Doesn’t seem relevant to this discussion to me.

          • txpatriot says:

            Scott; I agree that providing service to rural areas is more costly than providing service to urban areas. It seems we both agree on that.

            So how is it that these two rural telcos are able to price their services below that of the big carriers in Georgia? Are they really THAT much more efficient? If so, then why do they need a subsidy at all?

            While they may need some help with restoration expenses, that is a one-time expense, but the subsidy is something they get EVERY YEAR. Surely the hurricane damage they talk about isn’t something that happens every year?

            And even if it did, wouldn’t such damage affect many telcos in Georgia? Why are these two so special?

            • txpatriot says:

              Scott I just realized I can turn my own question around: if AT&T’s costs are so low, why are their own rates so high? And that is a fair question to ask.

              If AT&T wants the Georgia Commission to investigate the local rates of these two small carriers, they better be prepared to explain why their own rates are so high.

            • Scott says:

              Well I worked for a local Telco for several years in rural Alaska so I do have some experience in that area.

              It’s hard to say exactly since we don’t really know the what the situation is with the telco’s involved here, their subsidies, or level of service, and costs. Most like mine were also heavily unionized with high paying jobs including full benefits before privatization starting slowly wiping that out.

              In my experience, where my telco was the ILEC competing providers such as our local Cable Co, ISP’s, AT&T, etc leased our copper lines from us, obviously when you had infrastructure like that it made no sense for each company to go out and lay their own lines to the customer. So depending on regulations or lack of regulations you as the ILEC were either at a major disadvantage if you were forced to sell at near cost or at a major advantage if you were able to mark up the lines with a healthy profit.

              Since we’re pretty well past deregulation it could be anyones game but whoever was the original ILEC likely still has some of those companies in the area leasing lines or most larger companies like AT&T often built out their own facilities. However since AT&T was asking for price increases of the Telcos and not a decrease in their leased lines, I’d suspect they are operating their own facility.

              Still, for a company like AT&T as they’ve publicly stated they have no interest in providing services to rural America, they have no incentive to compete in rural areas either with landlines when cellular is cheaper and multiple times more profitable plus has less regulation.

              Really we could hash it out on what vague info has been given but it sounds like the commission just needs to evaluate the situations and make the call. I just hope it’s the right one because big corps, especially AT&T have consistently over the last decade managed to dominate the market and get their way against consumers best interests. Their executives have always been incredibly talented and ruthless in building that company back up.

              • txpatriot says:

                Well said.

              • Alaska in particular is always a challenging market — deciding who is worse: GCI (Gouge Customers Incessantly) or ACS (Alaskan Cash Suck).

                Now that the two have joined forces in wireless, you can be sure it’s good for them and probably not so good for you.

  2. Duffin says:

    Wait wait wait…are they serious? It’s anti-competitive to charge less than your competitors? They really have to just sit in their board rooms and decide to come up with the stupidest thing to say and choose that to go with. This angers me more than probably anything they’ve ever said.

    • txpatriot says:

      Maybe you don’t have a local landline but those who do may be interested in knowing that they pay a higher state & federal surcharge in order to subsidize companies like these.

      • Duffin says:

        I do have a local landline and why would I care if I pay a “higher subsidy”? I still pay less for it than I did with Time Warner. AND my phone still works when there’s no power.

  3. txpatriot says:

    Duffin that’s great for you but how about everybody else? There aren’t many people I know who enjoy paying higher taxes and fees than they would otherwise have to pay. But that’s just me . . .

    • Duffin says:

      Right, I’m sure slightly higher subsidies really raise your taxes so very much. Do you have any numbers to prove that because utilities are subsidized, that somehow our taxes are significantly higher than they normally would be? Honestly, man…there are such bigger things that the government does that are more important to worry about. If you’re so worried about paying higher taxes, why not lobby to have our military budget sliced? Our taxes go to the military more than any other branch of the government.

      • txpatriot says:

        No I don’t have numbers. If you’re OK subsidizing these rural telcos then more power to you. Just don’t assume everybody is OK with it.

        • Duffin says:

          If you have no proof to back up your claims, you really shouldn’t be making them. It just makes you look like a mouthpiece spouting off things you heard. You assume that for some reason, by rural utilities getting subsidies, that it somehow raises our taxes a lot. But, you have no reason to think that way as you admitted.

          • txpatriot says:

            I never said the taxes are higher by “a lot”. I said they are higher than they otherwise would be, which stands to reason. And if given a choice, I assume most people would prefer to pay less in taxes, but again that’s just me. Some people obviously are happy to pay more.

            • Duffin says:

              If it’s not by a significant amount, who cares? Would you seriously be making a big deal if you had to pay $5 more in taxes every year? Or $15? If so, you’re way more frugal than “most people” you assume you know. Okay, your statement is technically correct. Most people would prefer to pay fewer taxes. But, that doesn’t mean they would prefer to pay more for their landline, either. I’m sure they would prefer both, paying fewer taxes and paying less for their landline. There are plenty of other, way more bloated government programs which are only useful to a handful of people which could be cut. But, my point is, if you seriously think the majority of Americans are worried about an extra 5 to 15 bucks a year, you’re delusional.

              • txpatriot says:

                I concede that the effect on any given Georgia ratepayer (or taxpayer) is minimal — but where does it stop?

                Using your logic, for just a few dollars more per citizen, those rural telco customers could get their services for free — wouldn’t that be great? The fact is, they are living off other Georgia customers and whether the hit per citizen is a few cents or several dollars isn’t the issue — subsidies by their nature means one person is footing the bill for another.

                Look I don’t oppose all subsidies necessarily. I recognize that the cost to serve customers in rural areas is higher than the costs to serve in urban areas. I’m just saying that these two companies are taking things to the extreme.

                OTOH, it’s too bad AT&T had to make this filing. The regulators running the Georgia universal service fund should have spotted this scam long ago and put an end to it.

                • rjdafoe says:

                  I would like to know why you think it is to the extreme? AT&T needs to charge more becuase they are big and they expect a certain profit. Smaller companies can charge less becuase they do not have the overhead. In telecommunication, the smaller companies should be getting more. That is the way it should work.

                  • txpatriot says:

                    Whether or not the local rates for these two companies is “extreme” will be up to the Georgia Commission to decide, not me.

                • You are forgetting the affected phone companies submitted paperwork showing those subsidies are also covering storm damage to their landline network which is mostly rural and that they earlier increased rates in compliance with state law to make sure they are not selling service at a loss covered by a subsidy. Their rate breakdown is hardly dirt cheap and they are not giving it all away.

                  AT&T does not want to sell at that price because they like to earn more. They also want to sell those customers on wireless service as a replacement for their landlines, but they are apparently not competitive at the prices they are charging. So the solution is not to lower your price but make the other guy raise theirs on the flimsiest excuse.

                  • txpatriot says:

                    Like I said in response to rjdafoe, it will be up to the Georgia Commission to decide if the local rates of these two companies are too low. My guess is AT&T will lose that argument.

      • rjdafoe says:

        Whatthey are not saying is that AT&T and those other companies ALSO get a cut of those subsidies. It can be argued that they should get LESS becuase they are so big and the small companies should get a boost to compete.

        • Duffin says:

          Oh, of course. Not to mention, those companies also use tax loopholes that the utilities don’t use to basically pay fewer taxes than they should be. So, they’re making more profit and paying fewer taxes.

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