by Rudolph Bell, Greenville News

Consumers’ rights to complain to state regulators about poor telephone service would be restricted while phone companies’ latitude in setting prices would expand under legislation making its way through the General Assembly, according to the state’s acting consumer advocate.
The bill would remove the state Public Service Commission from regulating the “bundled” services of former phone monopolies such as BellSouth Corp.

Consumers or competitors could not complain to the PSC about poor service or unfair practices when it comes to bundled services as they can now, said Elliott Elam, the state’s acting consumer advocate.

“The only resort a customer or competitor would have would be to go to federal court,” said Elam, who opposes the bill.

BellSouth, which backs the bill, said it will give consumers more choices and better prices — just like when BellSouth was allowed to start selling long-distance service in the state.

“We just want to compete without our hands tied behind our back,” said Hank Fisher, BellSouth’s executive director in the state.

Since 1996, former monopolies such as BellSouth have been required to make their lines available to competitors such as Greenville’s NewSouth Communications Corp.

As of June 30, 2003, the new competitors had captured 8 percent of South Carolina’s market for conventional local service, according to a Federal Communications Commission report.

“There is competition, more competition in the hard-line market than we’ve ever had before,” said BellSouth spokeswoman Marcia Purday. “And we’ve got to take baby steps toward moving the regulation to where the market has moved.”

She wouldn’t say how much of BellSouth’s conventional service is sold as bundled services.

The legislation has passed the House. The Senate Judiciary Committee is scheduled to take it up on Tuesday.

The bill would also let rural telephone companies such as the Piedmont Rural Telephone Cooperative in Laurens switch to a less stringent form of regulation as long as they face competition from two wireless telephone companies.

As it is now, they are required to return any earnings over a set amount to their customers. The bill would allow them to opt for regulation that uses price caps instead of an established rate of return to prevent price-gouging.

Elam said the rural companies need traditional oversight because they still don’t have meaningful competition.

“I think it will stifle the development of competition in the rural areas if you allow these rural companies to take excess earnings and plow it back into other businesses,” he said.

Frank Knapp, president of the South Carolina Small Business Chamber of Commerce, agrees. He said two wireless competitors do not present a realistic competitive alternative.

The rural phone companies “are monopolies and ought to be regulated as monopolies,” said Knapp, whose group opposes the bill.

But Jim Wilder, general manager of the Piedmont Rural Telephone Cooperative in Laurens, said his cooperative needs price flexibility to respond to a rapidly changing telephone market.

The cooperative has about 14,000 customers in the northern two-thirds of Laurens County and the southern tip of Spartanburg County. Wilder said his cooperative faces no real competition in the “wireline” business but that six wireless companies compete in its service area.

Plus, he said, cable companies are starting to get into the telephone business. “What we’re trying to do is get prepared so when things like that occur, we’ll be ready,” he said.

Also fighting the bill is CompSouth, a trade association that represents BellSouth competitors, including NewSouth Communications.

For its part, the PSC wants lawmakers to add more consumer protections to the bill, said Douglas Pratt, an engineer at the agency and its point man on the issue.

“I think this will have a potential impact on virtually every telephone consumer in South Carolina, other than the very largest of businesses,” Pratt said.

For BellSouth, the bill is the latest in a series of moves toward deregulation.

In 1996, state lawmakers permitted BellSouth to move to the less stringent form of regulation that uses price caps instead of a set rate of return. In 2002, federal regulators gave BellSouth long-sought permission to sell long-distance service in South Carolina. And last year, state lawmakers removed its broadband offerings from PSC oversight.

Still, the Atlanta-based company retains a commanding position in South Carolina’s conventional local service market with a 55 percent share, Purday said. Within its assigned territory in South Carolina, BellSouth has kept 90 percent of residential customers and 68 percent of business customers, she said.

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