Gte Seeks Rural Exemption At&T;, Utilities Panel Oppose Designation For Huge Company

Rural customers are the ones Congress wanted to protect when it created exemptions from competition for rural telephone companies, GTE officials argued Friday.

“Rural companies are the way by which we serve rural consumers,” said Tim O’Connell, a GTE attorney who urged the Idaho Public Utilities Commission to allow GTE a rural exemption. “It simply is not correct to try to define a rural telephone company by its size.”

But the company faced stiff opposition from the PUC staff and lawyers for AT&T, MCI and a group of other phone companies. They said GTE isn’t entitled to a rural exemption because it’s such a big company.

The PUC should issue a decision by the end of the month.

GTE, which provides local telephone service to all of North Idaho, is the second-largest phone company in the nation. It was the largest until the recent merger of PacTel and Western Bell.

GTE has persuaded one state, Kentucky, to recognize it as a rural company, but Kentucky then terminated the rural exemption. Virginia gave GTE a rural exemption for one service area, but not for another. A half-dozen other states have rejected GTE’s bid.

Greg Harwood, a lawyer for AT&T, said, “GTE clearly is not a small, rural telephone carrier.”

GTE is basing its bid for rural status on a clause in federal law that says a company qualifies if not more than 15 percent of its lines are in communities of 50,000 or more. GTE doesn’t have any cities that large in its Idaho service area. But AT&T says the state should look at GTE’s parent company, which includes subsidiaries serving many large cities across the nation.

The question comes as a raft of companies, including AT&T, are poised to try to nab some of GTE’s North Idaho customers under new federal and state laws deregulating local telephone service. The new laws are designed to open local service to competition in the same way that long-distance service became a competitive business a decade ago.

But it’s more complicated with local phone service. That’s because there’s only one network of lines running to people’s homes. The new federal law requires existing phone companies to allow competitors to use their lines at a wholesale rate.

GTE, which is required to provide service to anyone who wants a phone line, contends it’s subsidizing rural rates by charging more for businesses, toll calls and other services. If competitors come in and take only the more profitable urban and business customers, GTE’s remaining customers will suffer, the company says.

“GTE has no problem with the idea of competition,” Meade Seaman, director of local competition and interconnection for GTE, told the PUC. “What GTE has a problem with is unfair competition, unfair prices - prices that subsidize the entry of new competition at GTE customers’ expense.”

If GTE gets a rural exemption, the state would have to consider several factors in allowing competition against it. They include whether the competition would create an undue economic burden, its impact on universal phone service, and whether it’s technically feasible.

AT&T has been negotiating an interconnection agreement with GTE, and GTE says the terms AT&T has laid out have problems on all three counts. The wholesale prices are set too low, which could hurt GTE’s ability to provide affordable service to everyone, Seaman said.

And AT&T’s plan doesn’t take into account the fact that 20 percent of North Idaho customers are served by microwave links instead of lines strung on poles. Those microwaves are at capacity. Because AT&T wouldn’t place switches in every community, the firm would use the microwave link every time a customer in Kellogg called a neighbor, in order to run the call through its switch in Coeur d’Alene or Spokane.

Seaman said that would force expensive upgrades in microwave service or even costlier alternatives.

Joe Cusick, telecommunications section supervisor for the PUC, said issues about AT&T’s proposal will be worked out when the two companies go through arbitration hearings to help them reach an interconnection agreement. They’re not at issue on the rural exemption, he said.

“In any arbitration proceeding, the local exchange companies have a right to recoup those costs,” Cusick said. “They aren’t simply dumped on them.”

Minnesota, Nebraska and Pennsylvania all ruled that the parent company should be considered in GTE’s bid for a rural exemptions, and Idaho’s PUC commissioners appeared to be leaning the same direction Friday.

Commissioner Dennis Hansen questioned Seaman closely about ties between the Idaho end of GTE and the parent company. “Can I buy GTE’s stock in just the Idaho operation?” he asked.

The answer was no.

Commissioner Marsha Smith noted that when the PUC needed to contact GTE about operational questions, it spoke with company officials in Everett, Wash.

GTE said its regional company, GTE Northwest, also meets the rural-exemption test, but the PUC staff disputed that.

O’Connell noted that the PUC’s decisions relate to what happens in Idaho - not to what happens in other states.

GTE’s customers may live in urban areas in Washington, but in Idaho, they’re rural, he said.

, DataTimes