Phone dispute holds up regulatory commission bill

Posted: Friday, May 10, 2002

Alaska's main agency that regulates utilities and phone companies is in danger of being put out of business because of a dispute with the state's largest telephone company, Alaska Communications Systems.

The dispute could impact General Communication Inc.'s expansion into the local phone service market in Juneau.

The Regulatory Commission of Alaska was set up in 1999 after the Alaska Public Utilities Commission was dissolved. The RCA oversees telephone companies and water, sewer and electrical utilities.

Unless the Legislature reauthorizes it this year, the agency will enter a one-year shutdown beginning July 1. No one believes the state will get out of the regulation business, but delay on a bill to reauthorize the commission could stall action on new regulatory business.

The measure to extend the agency another four years passed the House 35-1 on April 22. It's now in the Senate Judiciary Committee chaired by Robin Taylor, a Wrangell Republican who has not scheduled it for a hearing.

With less than a week left in the legislative session, Gov. Tony Knowles has threatened a special session if the Senate does not vote on the matter.

"I'm not going to let the Regulatory Commission of Alaska be buried anonymously," Knowles told the Anchorage Daily News on Thursday. "However they vote on it is fine, but they are going to vote on it."

Taylor said numerous utilities have concerns about the RCA.

"There's a tremendous undercurrent out there you haven't heard about," he said.

ACS President Wes Carson said the company is not trying to kill the agency. But it has problems with rulings in which the RCA refused to allow ACS to charge its competitors as much as it wants for using its telephone wires in Alaska's biggest markets: Anchorage, Fairbanks and Juneau.

Commission decisions have unfairly favored ACS' main competitor in the local phone market, General Communication Inc., and the Legislature should wait until a state-funded study of the telecommunications industry is completed before acting, he said.

"A reauthorization now, absent the study, closes the door on a legislative fix if there is something contrary to the good of the state," Carson said.

RCA Chairwoman Nan Thompson met Tuesday with Taylor and Senate President Rick Halford, a Chugiak Republican. Both had concerns about reauthorization, she said.

"The things they are telling me don't make much sense," she said. As for specific policy concerns from legislators, she said, "I haven't heard one yet."

Supporters of the reauthorization bill say ACS' problems lie far from the Capitol.

"This is a case of a narrow special interest holding up a bill. (ACS) doesn't like the rulings (from the RCA). Now they are using strong-arm tactics," said Rep. Eldon Mulder, an Anchorage Republican and co-chairman of the House Finance Committee. He and House Speaker Brian Porter, an Anchorage Republican, support the bill.

ACS was formed in 1999 and the ability to charge competitors higher rates was seen as a key to its success. Management and investors were confident the company would get favorable rulings from the RCA.

However, the company has lost money every year since 1999. Last year the company lost $11.2 million on $332 million in revenue.

GCI is eating into ACS' local phone business, holding 40 percent of the Anchorage market. In Fairbanks, GCI has won 10 percent of customers in eight months. GCI also has begun expansion into the local phone service market in Juneau, competing with ACS for customers. But a wind-down of the RCA could delay further expansion, officials said.

Under Alaska regulations, ACS must lease use of its local phone lines to its competitors, including GCI, at a fixed rate set by the RCA. In 1999, the rate in Anchorage was $13.85 per line. Wall Street analysts predicted the RCA would allow the company to raise the rate to $20 or more.

In November, the RCA set a rate of $14.92, a decision that cost ACS $2 million in the Anchorage phone market last year, said ACS President Carson said. The rate is below ACS' cost per line, he said, and in effect, ACS is subsidizing GCI's business.

"We're selling (lines) for less than our cost," Carson said. "How do you get investment into the state? Where's the incentive if you've got to turn around and give it to your competitor?"

ACS has appealed to Alaska courts without success.

"The acid test for us is the courts, and they've backed us up," said commission Chairwoman Thompson. ACS doesn't like "a decision in a particular case, and so they are trying to get rid of us politically."

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