The Chesapeake & Potomac Telephone Co. said yesterday it was in the process of complying with a request by the Public Service Commission of the District of Columbia to provide information that might show whether District telephone users were subsidizing the commercial operations of Bell Atlantic Corp., its parent company.
For months, the D.C. Office of the People's Counsel had been seeking information from C&P about its financial relationship with Bell Atlantic.
The People's Counsel maintains that nearly $20 million of the $54.5 million rate increase C&P requested in the District last August involves cost allocations for management services Bell Atlantic provides its regulated telephone companies. So far, according to People's Counsel Frederick Dorsey, C&P has only provided details of its financial relationship to Bell Atlantic on a piecemeal basis
"They C&P provided information in early March but just on a piecemeal basis," said Dorsey. "They have complied with the letter of the law on discovery in the case but the way in which they have handled it has resulted in inadequate information when it comes to financial relationships."
C&P spokesman Web Chamberlin said yesterday the company is now in the process of complying with the PSC request.
Dorsey said the information is essential because "we had to know those allocations of cost were appropriate; we had to make sure C&P wasn't financing any Bell Atlantic unregulated activities with ratepayer money."
"Bell Atlantic is determined to exclude their competitive activities from commission review; their sensitivity in this area goes so far, in point of fact C&P doesn't know a lot about Bell Atlantic," Dorsey said.
C&P was directed last week by the Public Service Commission to provide "an explanation and justification of cost by (Bell Atlantic subsidiaries) Management Services Inc., Corporate Services Inc. and Bell Communications Corp. (Bellcor) between the regulated and unregulated Bell Atlantic affiliates."
The PSC also found it could not make a determination on whether MSI, which makes procurements for Bell Atlantic's phone companies, and Bellcor, a research and development subsidiary owned by all seven regional phone companies, perform services for Bell Atlantic's unregulated subsidiaries for which stockholders are to assume risk.
Chamberlin said it is not unusual for utility regulators around the country to require additional data or information from phone companies as rate requests are examined.
"C&P is very aware of what Bell Atlantic does and what their business is, and the information provided to Mr. Dorsey clearly points out this relationship," he said. Chamberlin said C&P had "fully provided" information to all parties in the case.
"Further, we feel that the appropriate forum to debate these issues is not in the press but before the PSC where hearings on the rate request are to begin later this month," Chamberlin said.
Dorsey has questioned the services provided by MSI. Dorsey said he was not convinced the same services could not be provided for less by outside companies.
"The services accomplished by MSI were previously handled by AT&T," said Dorsey, adding that what cost $6 million to $8 million a year before divestiture now costs C&P $20 million.
"C&P has said that is what Bell Atlantic charges but they didn't explain why it cost that in relationship to the market . . . is this a screwdriver costing us $295 that you can buy at Ace Hardware for $1.95?" said Dorsey.
A Bell Atlantic spokesman said AT&T had greater "economies of scale" before divestiture when it provided such services for all local phone companies.
Dorsey also said while C&P maintains it is not earning its authorized rate of return, a discussion of rate of return has "no meaning if you can't get to the company Bell Atlantic that is the full source of equity."
Now that C&P competes with Bell Atlantic's unregulated subsidiary Bell Atlanticom yet another area of "some serious conflict problems" is raised, said Dorsey. C&P has just received a reduction in its rates for Centrex, or private business network services because of intense competition from PBXs or telecommunications devices that businesses can buy to provide the same service.
Bell Atlanticom sells PBXs and "while they are weaning their Centrex customers to PBX, they have an advantage of reduced price to Centrex on the threat they are losing their customers -- they get it on both ends," he said.
Essentially, Bell Atlantic is in a position to "sell PBX close to cost, beating out its competition because they have the rate regulated services to rely on for revenue stream; moreover they can use Bellcor's R&D facilities to improve the Centrex technology even further," he said.
C&P's Chamberlin said the company sees "no conflict between C&P's attempt to market Centrex and Bell Atlanticom's sale of the equipment."