PacTel, SBC to Protest Refunds, Restrictions

Pacific Telesis Group and SBC Communications will ask the California Public Utilities Commission today to approve their $16.7-billion merger without requiring any refund to consumers or the strict, ongoing regulatory measures proposed by a pair of PUC judges last month.

The Baby Bells gained an important ally Thursday when the state of California emerged as a strong opponent of the proposal, which would require that the companies refund $590.5 million to ratepayers. Julie Meier Wright, secretary of the Trade and Commerce Agency, said such regulatory action would severely hamper the state’s ability to attract and retain businesses.

The phone companies will make their case in San Francisco at the last public hearing before the PUC decides whether to approve the biggest domestic phone merger since the Telecommunications Reform Act was signed last year. The five commissioners will make a final decision March 31.

The administrative law judges recommended three weeks ago that the companies be required to refund $590.5 million to ratepayers over five years--the phone companies peg the total cost at $750 million once inflation is taken into account--a savings of about 74 cents per month for an average phone bill of $31. The judges also suggested that SBC be prohibited from using revenue from Pacific Bell’s core phone business on other units of the combined company.

Both PacTel and SBC have strongly hinted that the merger could be called off if the PUC insists on imposing what they call a “crippling penalty.” They will try to persuade the commissioners to come up with an alternate blueprint for the deal, which would have to be issued by Monday.

Several grass-roots organizations will urge the commissioners to back the phone companies because the deal will have a positive impact on the state. SBC and PacTel have promised to open four headquarters operations for the combined company in California and create 1,000 jobs here. They also offered to set up a $50-million fund to bring new technology to underserved communities and to bring phone service to several million additional homes.

John Gamboa, executive director of the Greenlining Institute, a multiethnic public policy group based in San Francisco, emphasized that the $50-million technology fund would have a bigger impact than refunds spread thin among millions of ratepayers.

But consumer groups say PacBell’s customers, whose fees provided the money to build the network that SBC plans to buy, should receive a greater share of the economic benefit of the merger. They also will push for continuing scrutiny to ensure that the phone companies’ don’t renege on their promises of more jobs, investment and lower rates, and will lobby the PUC panel to include provisions for modernizing the telephone infrastructure and improving customer service.