Lawmakers asked to drop phone rate caps

Executives from the state's telephone companies asked Nevada lawmakers Tuesday to drop the state's rate caps on basic phone service, saying they were outdated in the age of digital communication.

They asked the Senate Commerce and Labor Committee to pass AB518, a proposal to drop state price controls on basic telephone service. Under current regulations, the large "incumbent" telephone companies - AT&T Nevada in northern Nevada, and Embarq in southern Nevada - are obligated to provide telephone service to all customers in their territory. The state Public Utilities Commission sets the companies' rate for basic, bare-bones telephone service - currently $10.40 per month.

AT&T and Embarq are less regulated when selling add-on telephone services. In exchange for that lighter regulation, they must compete with other companies in the market, but AT&T and Embarq are still responsible under state law for being the "provider of last resort" to all customers at the state-mandated rate.

Under the amended AB518, AT&T and Embarq would be relieved of those rate caps in 2012. The original bill dropped the rate caps in June 2008, a deadline that PUC officials said was too soon.

The phone companies argue that over the years, the telecommunications market has gone from monopoly to highly competitive. They want to be regulated like their competitors, who don't have rate caps.

With widespread broadband and wireless networks, consumers have more options, said Embarq general manager Kristin McMillan. In 2006, Nevada had 1.9 million wireless subscribers, according to FCC statistics cited by McMillan - 72 percent of the population.

"Current communications laws lag reality, and they do need reform," said McMillan. "Many of them are based on a time when traditional companies, land line companies, were considered to be monopolies, and there was little or no competition in the marketplace."

AARP lobbyist Barry Gold was the sole opponent who spoke Tuesday, saying that basic local service still is not competitive and must be protected. He added that after 2012, prices for phone service could double.

"Telephone service is a basic necessity that allows older people to maintain social contact, preserve health and safety, and gain assistance in an emergency," said Gold. "This is a bill whose time has not yet come."

Lawmakers should study a report on the industry that the PUC will submit in 2010 before setting a hard deadline for telephone deregulation, he said.

While it would no longer set rates after 2012, the PUC would still oversee wholesale pricing, and help resolve customer billing disputes and service complaints.

The phone companies agreed to increase the number of people who qualify for the Lifeline low-income telephone service. Currently, Embarq and AT&T customers must have annual incomes no higher than 135 percent of the federal poverty level. AB518 would increase that amount to 175 percent, or $36,138 for a family of four.

The committee also considered AB526, which would allow cable television companies to reach franchising agreements with the state, rather than with individual municipalities.

Cox Communications Vice President Steve Schorr said the bill would allow the cities to continue to collect franchising fees, while allowing companies to make centralized negotiations with the state, rather than working out contracts with individual cities.