As regional telephone companies diversify, state regulators and phone companies are beginning to knock heads over regulators' right to know about competitive businesses phone companies run.
Because phone companies still have a monopoly on local telephone service sold to the vast majority of residential and small-business customers, state regulators are trying to make sure ratepayer money does not subsidize the expenses of unregulated subsidiaries.
"The National Association of State Utility Regulators is very concerned about doing whatever is necessary to prevent the Bell companies from using their local ratepayers and monopoly local services to subsidize their forays into more competitive endeavors," said one official of the Washington-based association, which represents all 50 state utility commissions.
Conflicts between state regulators and Bell Atlantic Corp. already have flared over how much local-service customers should pay for phone-company entities that perform management and research services for both regulated and unregulated subsidiaries.
Bell Atlantic maintains that a "Chinese wall" separates regulated from unregulated activities at corporate entities such as Bell Communications Research Corp., owned jointly by all seven regional phone companies.
"We have gone to great lengths to avoid any hint of cross-subsidy or entanglements with the unregulated entities," said John F. Howe, division manager for intercompany contracts at Bell Atlantic Network Services Inc., which provides management support to Bell Atlantic's phone companies.
But in this year's rate cases in the District and Maryland, state regulators and consumer advocates said they could not immediately get information from Chesapeake & Potomac Telephone Co. about how costs were allocated among C&P, its parent -- Bell Atlantic -- and subsidiaries such as Corporate Services Inc., which performs financial and other functions for regulated and unregulated entities.
The information is important because "the major thing is whether or not these enterprises are really engaging in an activity that allows some other subsidiary to offer better computer service and the local ratepayers are not really [benefited]," said Gregory Carmean, acting Maryland people's counsel, who represents customers before the commission.
The D.C. and Maryland commissions received information and granted most, but not all, of the money sought. In the District, costs associated with Corporate Services Inc. were denied because information about regulated subsidiaries was not forthcoming.
"We had a little confrontation in the last case," said D.C. Public Service Commissioner Wesley Long. "There is going to be a lot of skirmishing and suits -- these companies are new animals, and we are all feeling our way," he said.
Bell Atlantic maintains the sums in question are very small and that the door to financial information is open -- as long as it does not concern its unregulated businesses.
"We certainly have no trouble providing information that cost allocations are properly done," said Philip Campbell, president of Bell Atlantic Network Services Inc. "But we certainly can't get into any detailed exposition of unregulated businesses," he said. Bell Atlantic is not trying to "distract" regulators; it is trying to protect proprietary information that could tip its hand to competitors, he said.
State commissioners disagree.
"The position they are taking is we can't give it to you, but that is not the law," said Long. The D.C. Public Service Commission has now "put C&P and Bell Atlantic on active notice we are going to require the information," said Howard Davenport, general counsel for the commission.
The Maryland Public Service Commission is investigating cost allocations betring with some of his work. regulators met in recent months to come up with a strategy for dealing with cost allocations, state regulators say.
"In the final analysis, they do want more information in the future," said Bell Atlantic's Howe. "The burden of proof is clearly on the company -- you can be sure in the next round I'll provide more information.
"We really don't have anything to hide."