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Posted March 25, 2009 | Copyright © The Northern Virginia Daily
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Embarq: Phone rates may go up under plan

By James Heffernan -- jheffernan@nvdaily.com

Embarq customers could see significantly higher phone bills under a proposal aimed at increasing competition among carriers in rural areas of the state.

In a hearing Friday before the State Corporation Commission, attorneys for Embarq, the local telephone provider in Warren, Page and Rappahannock counties, asked the panel to reject a recommendation from the hearing commissioner that the company reduce the wholesale rates it charges long-distance and wireless companies for use of its local network.

The recommendation follows a complaint initially filed in 2007 by Sprint Nextel calling for a reduction in Embarq's intrastate carrier access rates.

"While Embarq should be permitted to recover the economic cost of providing this monopoly service ... it is impossible to justify rates as high as Embarq's present rates," attorneys for Sprint Nextel argue in the claim. Embarq's wholesale rates in Virginia are at least three times those of Verizon, they claim, and higher than all but three of Embarq's affiliates in other states.

Sprint and other telecommunications providers in Virginia, then, are in effect "paying Embarq a subsidy that Embarq can turn around and use to undercut them in the provision of competitive services," according to the claim.

Sprint Nextel is asking that the SCC reduce Embarq's intrastate access charges to the actual cost of the service.

But historically such rates have been set high enough to help cover the costs of providing basic local phone service in rural, high-cost areas of the state, according to Embarq. The company argues that an unfavorable ruling by the SCC could result in $23 million in lost revenue per year.

To offset that loss, Embarq would have to raise its local phone rates by as much as 46 percent over the next four years, and rates for caller ID and other add-on services could jump by as much as 75 percent, it says.

The Kansas-based company operates in 32 counties and seven cities in Virginia, and has enlisted the help of state legislators in the fight.

"Customers in rural areas should not have to shoulder a dramatic increase in a most basic and necessary service to benefit the country's largest and most profitable telecom providers while receiving no real benefit themselves," Del. Charles W. "Bill" Carrico, R-Galax, writes in a letter dated March 13 to SCC commissioner Joel Peck.

A local lawmaker agrees.

"I'm all for free markets and competition, but as someone who represents a rural district, I'm concerned about my constituents having to pay higher phone bills at a time when many are struggling to make ends meet," said Del. Clifford L. "Clay" Athey Jr., R-Front Royal.

As the failed electric deregulation experiment has shown, attempts to increase competition for public utilities tend to favor densely populated areas of the state at the expense of rural communities, where the costs of providing service are often much higher, Athey said.

"We end up paying more while also serving as a pass-through for the urban and suburban areas," he said, referring to plans for a pair of high-voltage electrical transmission lines that would pass through northwest Virginia en route to the Washington metro area and points northeast.

SCC spokesman Ken Schrad said it may be weeks or even months before the panel renders a decision.

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