C&P of Md. is ordered to cut rates Average area bill to decline 39 cents

January 23, 1993|By Timothy J. Mullaney | Timothy J. Mullaney,Staff Writer

Chesapeake & Potomac Telephone Co. of Maryland was ordered yesterday to cut rates by $28 million, eight months after the company asked the state Public Service Commission for a rate package that would have cut some rates, raised others but would have left overall revenue essentially the same.

"This is a bad decision, not just for C&P but for our customers, too," Frederick D'Alessio, president of C&P, said in a statement. David A. Paholczyk, a company spokesman, said the company would consider its options for appealing the order.

But consumer advocates were pleased by the decision.

"It's a rational compromise," said state People's Counsel John M. Glynn, who represents consumers before the Public Service Commission. "It leaves the company with enough incentive to continue to invest in their network. That's good for everyone in the long run."

The commission's order, called a "Solomonic compromise" by Mr. Glynn, will save about 39 cents a month for the average Baltimore-area residential telephone user with touch-tone service. The average Baltimore-area customer with unlimited local-calling privileges will now pay $15.76 a month for basic service.

Rural customers will save about 89 cents a month. The action will cut C&P's annual revenue from regulated phone service by about 1.5 percent.

Monthly line charges for business users will stay the same, as the cost of message units drops to about 9.3 cents, from 10 cents, said Frank O. Heintz, chairman of the commission. The average cost of in-state toll calls will fall about 15 percent, said Frank B. Fulton, Jr., director of consumer assistance and public affairs for the commission.

PD The bottom line is that Maryland consumers will continue to have

basic phone service that costs somewhat more than the national average. But the cost of phone service in the state has not increased since 1985, and rates have not been adjusted for inflation. The new rates will be effective for up to three years.

Indeed, the rate cut, which Mr. Fulton said will show up in full on bills for February service, is the third cut since 1985.

C&P's Mr. D'Alessio said rates have been reduced by $30 million over that period. "To now order us to further reduce rates is unwarranted and highly unreasonable," his statement added.

The commission's order includes the dropping of the $1.25 monthly fee that C&P charges for touch-tone service, in a bow to the reality that only 14 percent of the utility's 1.8 million customers still have rotary phones.

"It's the last vestige of another era, and the commission recognized that," Mr. Glynn said. "It is actually cheaper to provide touch tone."

Because the average 39-cents-a-month decrease for residential customers includes the dropping of the touch-tone fee, the rate for rotary service will rise slightly under the commission's plan.

Mr. Glynn said the rate case turned on how much of the decline in the cost of providing phone service ought to be passed on immediately to consumers. The cost of service has fallen because of improved technology, he said, but the company needs to retain at least some money from the cost-cutting to have an incentive to invest in technology to cut costs even more.

But C&P said the incentive this order would provide is not enough.

"This decision seriously calls into question C&P's ability to meet the future communications needs of the state of Maryland," the company said. "This is most unfortunate, given the fact that Maryland competes with other states in attracting new businesses."

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