Calling the Shots

In the Southwestern Bell and AT&T slugfest over supposed consumer savings, the biggest sucker punch of all is headed your way

AT&T, which just invested billions of dollars to buy a cable company, envisions itself as a consumer's sole provider of telecommunications services, including local phone, long distance, high-speed Internet and cable TV. It needs to be able to compete in local phone service because that is the likely entry point into a home where the company can push its other services.

More than AT&T, it's the small and midsize phone companies, aggressive upstarts such as Dallas-based Allegiance Telecom and the deep-pocketed Time Warner Telecom, that are most interested in making sure Bell does not succeed in taking the PUC out of the picture. They are concerned about predatory pricing and therefore have had the difficult task of having to make the conceptual argument to legislators that rate regulation is necessary to keep consumer prices high, at least until the market is truly competitive. They, too, were part of the coalition with AT&T and consumers. And they, like the consumer representatives, opposed the Senate compromise.

"I'm not sure consumers are a whole lot better off with two competitors than they are with a monopoly," says Charlie Land, executive director of TEXALTEL, an association that represents some of the small and midsize phone companies.

Wilmot came to the coalition as executive director after spending three years as a regional counsel for the Mexican American Legal Defense and Educational Fund (MALDEF) in San Antonio. Before that, he was Governor Ann Richards' appointee as the state's advocate for utility consumers.

Now, he is faced with reconciling consumer interests with those of AT&T and having to make excuses when those interests collide -- like when AT&T agreed to the Senate bill against the wishes of its consumer partners. Wilmot says the partnership's multimillion-dollar ad campaign, funded almost exclusively by AT&T, succeeded in that it exposed Bell's inflated access charges. But when asked whether it failed by helping ensure Bell walks away from the 1999 legislative session with dangerous deregulation advantages, Wilmot is less assured.

As Wilmot sees it, consumers owe gratitude to AT&T for at least having the guts to take on Bell over access charges. Bell undoubtedly would have gone to the Legislature this year asking for pricing flexibility and to cut the PUC out of the process. At least now, Wilmot says, access reductions are part of the deal.

The real question for consumers is whether the harm caused by deregulated pricing is made up by the benefit of the Legislature's mandating lower access rates. Consumer advocates, by virtue of their opposition to the Senate compromise bill, are saying it is not.

The first issue is whether the access reductions will be passed on to consumers equitably or even at all. AT&T officials have pledged to the PUC that it will flow through access charge reductions to consumers, but some legislators are not convinced the PUC will be able to determine if that's happening. Bell lobbyists are fond of asking: Why is AT&T pushing so hard for access reductions if all that money is going back to consumers?

Altruism is not AT&T's motive, but it likes the idea of taking profits away from Bell, which stands to lose about $100 million annually per penny of access reduction. The Senate compromise phases in a reduction, starting at one cent and graduating to three and a half cents, which means Bell stands to lose as much as $350 million a year.

Wilmot says he is convinced AT&T will pass on the savings to consumers. Of course, he also considers AT&T a partner, albeit one with the upper hand.

"A number of times we have gone cross-eyed with AT&T and had yelling matches," he says. "And if one of us doesn't like it, there's the door. Of course, it wouldn't be the door for them. It would be the door for me."

It doesn't sound like consumers and AT&T make very good partners, no matter what the lady in the clouds says.

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