C&P seeks shift from regulators to enter new era PSC hearing looks at future of telecommunications services.

November 18, 1991|By Ross Hetrick | Ross Hetrick,Evening Sun Staff

You get up in the morning and walk to your workplace -- your living room, where your computer and television are connected to a modern telecommunications system.

Not only can you do all the work by computer, but you also can show your boss various graphs and designs over the two-way video telephone connection.

At lunch, you see your doctor -- on the television. He checks your blood pressure with the help of a device connected to the set.

After work you may order a movie of your choice and it is transmitted to your television. No need to leave the house. If you feel like reading, you can order the text of a book or magazine from your local library and it will be displayed on your computer screen or television.

This could be the world of the not-so-distant future, according to the Chesapeake and Potomac Telephone Co.

But state regulations have to change to usher in this new world, the telephone company contends.

The future of telecommunications and what it means for state regulation is the topic of a hearing beginning today before the Public Service Commission.

The hearing, which was requested by the PSC, is primarily informational and no administrative action will be taken.

But it could have a bearing on a rate case next March and future regulatory matters.

In its filings for the hearing, C&P says it has already invested $2.5 billion in upgrading its network during the last five years and plans to spend another $6 billion to $8 billion during the next 20 years.

This investment would include the expansion of the company's fiber optic network to every home and business in Maryland. Fiber optic lines, which carry pulses of light over thin strands of glass, can handle thousands of conversations on each line. Since it is carrying light and not electrical impulses, the system is also immune to electromagnetic interference.

The company, which is a subsidiary of Bell Atlantic Corp. of Philadelphia, also would continue its shift to digital equipment, ensuring clearer and more precise transmissions.

Connected to televisions and computers, this technology could conceivably connect people to their workplaces, displace cable services, eliminate the need to rent videos and replace printed newspapers and magazines.

An application of this technology is already happening in Baltimore County public schools, where five courses are being taught at three high schools over an interactive television system.

The pilot project, which connects classes at Owings Mills, Chesapeake and Towson high schools, allows a teacher to talk to a class at his or her school and to classes at one or two other schools. In turn, the students at the other schools can talk with the instructor.

"It's the next best thing to being there," says Robert J. Harris, media specialist for the Baltimore County public school system. "You are basically there."

In fact, he says, some studies have found that students retain more information if they are taught over a television. "Kids are attuned to getting information from television," Harris says.

To bring about the improvements in its infrastructure, C&P primarily wants two things: a loosening of state regulation -- called "incentive regulation" -- and the shortening of depreciation schedules for high-tech equipment.

Both of these actions would give C&P a freer hand to raise rates for various services, thus bringing in more revenues for expansion.

The PSC in the last few years has been moving toward less regulation, allowing C&P to price certain services, which are considered to have competition, without getting approval from the commission. In return the telephone company has frozen some basic rates.

But C&P wants more. In its filing, C&P says it wants incentive regulation in place for a sufficient amount of time so that it is not subject to "second-guessing" by the commission.

The depreciation issue is tied to the measurement of the company's earnings, which in turn are used by the commission in setting C&P's rates.

Depreciation is a non-cash accounting item in which the cost of equipment and property is counted as an expense over a period of several years. The shorter the depreciation period, the higher the depreciation expense and the lower the overall profit.

Since the commission sets telephone fees based on a specific rate of return, a lower profit would justify a C&P request for higher rates. The telephone company says basic service could be shielded from such possible increases, however.

The issue might not be how much C&P can raise rates, but how much it should lower them. "They want a defense against lowering rates," says John M. Glynn, the people's counsel, the state official who represents ratepayers before the commission.

Advanced computer technology has actually made the per-unit cost of telecommunications cheaper and a case could be made for lowering rates, he says.

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