Byline: STEVE ALEXANDER; STAFF WRITER
AT&T is trying to get Minnesota to slash the cost of one of the last vestiges of a bygone telecommunications era, a move some argue could raise phone rates for rural consumers by as much as 50 percent as rural phone companies try to recoup the revenue.
At issue is an estimated $38 million in so-called access charges that firms such as AT&T pay to the local telephone networks to deliver their long-distance calls within Minnesota. The charges were devised by the federal government during the 1980s breakup of the AT&T telephone monopoly as a way to subsidize rural phone companies and their presumed higher operating costs with their relatively few customers spread out over a wide area.
But, AT&T says, most rural phone companies don't need the subsidy today and cutting access charges will lower its long-distance rates for consumers. It also argues that, as phone calls shift from land lines to wireless and the Internet, companies such as Sprint and Skype, which pay much cheaper charges, should shoulder more of the burden.
"Access charges are pure profit for some local phone companies," said Bob Bass, AT&T's president for Minnesota.
But the Minnesota Telecom Alliance, a St. Paul trade association representing the more than 80 rural phone companies in the state, says access charges are vital to rural phone companies, and make up about 20 percent of their revenue.
"There's no upside for anybody except AT&T," said Brent Christensen, CEO of the Minnesota Telecom Alliance. Besides higher rates for rural consumers should AT&T succeed, the company's long-distance rates are unlikely to go down, he said.
The long-distance giant already has approached Illinois, Michigan and Nebraska about reducing the charges. And it's tried for more than a decade to get the Minnesota Public Utilities Commission (PUC) to make a similar move. AT&T says it will go the legislative route this time, and support a bill that Rep. Joe Hoppe, R-Chaska, is expected to introduce in the Minnesota House in a few weeks. Hoppe could not be reached Wednesday.
AT&T's push only involves charges for in-state calls. Interstate access charges, which are lower than in-state ones, are regulated by the Federal Communications Commission (FCC).
Local phone companies prefer that the Minnesota Legislature do nothing on the issue for now, and they point out that the FCC is looking at how to regulate all forms of voice communication, which would supersede any state regulations. Land-line, wireless and Internet phone companies all pay different access charges, some of which can vary by state. In Minnesota, land-line phone companies such as AT&T pay between 4 and 6 cents per minute for each long distance call, while wireless companies pay a much lower access charge. Internet phone companies carrying long-distance calls pay no access charges.
"The FCC will come up with a plan for regulating all three flavors of voice: land line, wireless and Internet," Christensen said. "We'd like to be paid the same thing for all three types of long-distance calls, because that would be the fair thing to do."
Under federal law, Minnesota's government has complete authority only over the state's land lines, but not wireless or Internet calls. As a result, the state can't force wireless or Internet phone companies to pay higher access charges.
AT&T's Bass said one solution would be for the state to tax land line, wireless and Internet phone customers and use that money to subsidize rural phone companies in place of access charges. But he said it was doubtful the Legislature would approve a new tax this year.
The FCC has yet to update access charges, despite a 10-year bipartisan consensus among analysts and industry insiders that the present system needs to be revised, said Blair Levin, a fellow at the Aspen Institute, a Washington, D.C., public policy group. Part of the problem is that access charges have been made obsolete by new technology. Access charges are based on the number of minutes a call lasts, but with modern call-handling equipment the actual cost is the same if the call is 1 minute or 100 minutes, he said.
Levin said access charges should be the same for long-distance calls arriving by land line, wireless or the Internet: "It doesn't matter where the call came from, it should be treated the same way."
Another analyst says rural phone companies should be reviewed by state regulators to determine if they still need the system of subsidies that was set up decades ago.
"The notion of reducing access charges is a good thing, but it also should open up the broader question of who legitimately receives subsidies," said Lee Selwyn, president of Economics and Technology, a telecom policy consulting firm in Boston. "Rural telephone companies should get a subsidy if they can demonstrate they require it, but they shouldn't automatically be entitled to it."
Steve Alexander - 612-673-4553
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