C&P Yellow Pages request could end rate subsidy, consumer advocates fear

January 26, 1991|By Leslie Cauley

You can't tell by just looking at it, but your Bell Atlantic Corp. Yellow Pages directory for Maryland is as good as money in the bank -- more than $40 a year by some estimates.

That's because profits from Bell Atlantic's Yellow Pages business are used to subsidize basic phone rates, part of the master plan drawn up by lawmakers in 1984 when Ma Bell was broken up. The subsidy was supposed to help ease the sticker shock of higher monthly phone bills for consumers after divestiture.

PD Bell Atlantic's phone subsidiary in Maryland, C&P Telephone Co.,

contributes $50 million a year to subsidize basic phone rates statewide. That contribution, which was established in 1985, works out to about $27 per phone subscriber.

But state regulators estimate that if a new subsidy rate was established today using current Yellow Pages figures, it would be at least $75 million, or $42 per subscriber.

That's because C&P's Yellow Pages business has increased substantially over the past six years, leaving the company with fatter Yellow Pages profits that could be used to support basic rates.

Public Service Commission documents show that C&P's Yellow Pagesrevenues increased from $88.3 million in 1986 to $106.4 million in 1988, the last year for which figures were reported. C&P won't say how much of that is profit, but regulators estimate the figure in 1988 was about $75 million, $25 million more than in 1985.

Scott Rafferty, director of the commission's telecommunications division, said the question of whether to change C&P's subsidy level won't be addressed until spring. That's when the commission is expected to hold a rate case to determine if C&P's phone rates should be raised, lowered, or remain unchanged.

C&P, meanwhile, wants permission from the Public Service Commission to funnel Yellow Pages revenues from the monopoly side of its business to the competitive side of its business.

In Maryland, C&P gets to keep most of the profits from competitiveservices. That's not true for monopoly services, which are more tightly regulated and have profit caps.

C&P's request has worried some consumer advocates, who believe a ruling in favor of C&P could pave the way to remove the Yellow Pages subsidy later.

And that, according to People's Counsel John M. Glynn, would be a bad deal for consumers.

"It's not acceptable for us to have revenues assigned anywhere but to basic rates," said said Mr. Glynn, whose state office is responsible for representing the interests of ratepayers before the commission.

That view is shared by Janelle Cousino of the Maryland Action Coalition, which has vowed to fight any plans to withdraw the subsidy.

"They shouldn't be allowed to do that," said Ms. Cousino. "It may be good for shareholders but it's not good for the consumer."

C&P, for its part, claims it has no immediate plans to withdraw the subsidy.

"In 1992 there will be no request by the company to remove the subsidy Yellow Pages provides to basic rates," said C&P spokesman Al Burman.

But Mr. Burman declined to rule out the possibility that C&P may seek to have the subsidy removed later.

"I can't speculate beyond '92," he said.

Be that as it may, Mr. Burman said C&P's most recent request is not related to the subsidy or phone rates.

What it is related to, he said, is profit-sharing.

More to the point, he said C&P needs to shift Yellow Pages revenues to the competitive side of the ledger to draft a "profit-sharing" plan for ratepayers, a centerpiece of the new cost allocation manual. The cost allocation manual, which was ordered by the PSC last year, will spell out

how C&P assigns its costs.

The profit-sharing plan calls for C&P to share some of its profits from monopoly services with ratepayers -- consumers are supposed to receive a credit on their phone bills if C&P's earnings on monopoly services rise above a certain cap.

But before those returns can be calculated, a mathematical formula has to be devised based on revenues from C&P's monopoly services.

And that's where the rub comes in: C&P doesn't want revenues from Yellow Pages, already deemed a competitive service by the PSC, included in the formula. Consumer advocates, fearing an ulterior motive afoot, don't agree.

The issue, first raised in 1988, is setting the tone for what promises to be a long, very hot summer at the Public Service Commission, said People's Counsel John Glynn.

"It's going to be interesting," he said.

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