Suit aims to hold up phone competition

Alaska Communications filed state, federal lawsuits

Posted: Friday, September 29, 2000

Juneau is on the verge of being approved for competition in local phone service.

But a pending go-ahead from the Regulatory Commission of Alaska might not be the final word.

A lawsuit in federal District Court by the current provider is intended to derail the process. That would delay the move toward competition, which started three years ago.

Alaska Communications Systems, provider of local service in Juneau, Fairbanks and North Pole, said General Communication Inc. wants to "confiscate property" through an unreasonably cheap entry into those markets, using the ACS system, including phone lines, at an unfair price.

But GCI responded that ACS is against competition and is trying to recoup some of its past excess expenditures at GCI's expense.

The Regulatory Commission is scheduled to issue a final interconnection order by Thursday. GCI says it will start providing service in Juneau next year.

ACS contends it is the terms of competition, not competition per se, it is concerned about.

"I think it's inevitable you're going to have competition," said Mary Ann Pease, vice president of ACS in Anchorage. "If they want to use the (interconnection) rates we filed over a year ago, competition could start at any time."

But an arbitrator ruled in favor of GCI on the rate issue, and that finding was upheld by the Regulatory Commission in August.

Now, ACS has filed suit both at the state and federal level.

"They're covering all their bases by filing in both," said Nan Thompson, who chairs the commission.

ACS is asking the federal court to rule the commission has violated the Telecommunications Act of 1996 and the Constitution, and to block the commission from enforcing the interconnection order. The pending order amounts to "a taking of property," Pease said.

GCI reacted angrily to the filings.

"It's kind of a desperation move on their part and an outrageous one," said Dana Tindall, senior vice president of legal and regulatory affairs for GCI in Anchorage. "In general, they are opposed to competition."

The lawsuit "doesn't have a very good chance," Tindall said. But if it succeeded, "We'd have to start all over."

Although the issues in dispute are numerous and technical, the main one is what GCI must pay for gaining access to the ACS system rather than building from scratch.

Pease of ACS said the Regulatory Commission is incorrectly using national averages to determine suitable costs for various parts of its system. She said that improperly overlooks a variety of differences in Alaska, including a more rural service area than the Lower 48, extreme weather, and high material and labor costs.

But Tindall of GCI replied, "In general, that wasn't the issue."

Rather, ACS is asking for more than it would cost GCI to build its own system with modern, more efficient equipment, Tindall said. As a monopoly, ACS didn't always take competitive bids or get the lowest prices because the company knew it could pass on costs to ratepayers, she said. "Their network is a very expensive network, for those reasons."

In its ruling on the arbitrator's report Aug. 24, the commission concluded: "A monopoly provider makes investment decisions differently than a competitive provider. This interconnection agreement must set network element prices for a competitive market."

It's unclear how much money is at stake.

Tindall of GCI said the per-line cost in Juneau was set at $15.92, or $2.06 less than ACS wanted. In Fairbanks, the difference is $16 per line, she said.

Neither company gave a bottom line for what they're fighting over. Thompson of the Regulatory Commission said it's impossible to tell now because it depends on which parts of the existing system GCI uses, what it builds on its own and how many customers ultimately switch over.

Thompson said the commission will defend its position in court, but she wouldn't comment further on the case.

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