Fiber-optic network isn't 'free'

August 20, 1993

Did the Public Service Commission give the C&P Telephone Co. an extraordinarily favorable write-off of a huge pension obligation in order to help C&P pay for a fiber-optic network linking together every high school and college in Maryland?

That's the impression left by the confluence of these two events. C&P's ratepayers, it appears, will indeed be footing a hefty portion of the bill for this statewide fiber-optic telecommunications system.

That's not the way C&P is promoting this project, though. The company's president has promised the new statewide telecommunications network would have "absolutely no impact on basic ratepayers."

And a company vice president has stated in a letter to the editor on this page that "the risk -- that C&P might lose money on this initiative -- is borne solely by our investors. . . ratepayers do not, and will not, subsidize or otherwise pay for this service through their basic rates."

In fact, it now turns out that because of the PSC's favorable ruling on allowing a rapid amortization of C&P's pension obligations the timetable on the company's fiber-optic project has been accelerated. Money that could well have been refunded to local ratepayers -- $15 million -- will instead be used to help pay for the new telecommunications set-up for state high schools and colleges.

Not only did the PSC reverse an earlier decision and grant C&P an extraordinarily quick amortization that few, if any, other utilities elsewhere in the country have been allowed, the regulatory panel did so in the face of objections to this approach from both the People's Counsel and the PSC's own staff.

Further complicating the picture is the role of Frank O. Heintz, who not only chairs the PSC but is also a member of the governor's special telecommunications technology panel that is pushing the notion of this fiber-optic network C&P wants to build.

The impression of a conflict of interest -- either real or potential -- cannot be dismissed out of hand. Mr. Heintz should sever all ties to the governor's telecommunications panel immediately. Otherwise, the integrity of the PSC -- as well as Mr. Heintz' own integrity -- could be compromised.

As it stands, the PSC's actions and the telecommunications panel's discussions with C&P seem linked. This is just one more reason why the deal with C&P never should be given final state approval without first seeking competitive offers from other companies. The manner in which this agreement was reached raises troubling questions.

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