A Virginia legislative committee, confronted with the unusual situation of telephone companies asking to be regulated, decided today that the utilities were right and do need some regulation.
The companies have portrayed themselves as the victims of greedy local governments that want lower rates at the expense of the average consumer and other customers. To escape endless rounds of negotiations, the phone companies are asking the legislature to let the State Corporation Commission, which already regulates business and consumer local rates, decide what the firms should charge the governments.
Organizations for the governments, fearful that the SCC will favor the telephone companies, strongly oppose a bill that would give the SCC power to set their rates. C. Flippo Hicks, an attorney for the Virginia Association of Counties, said the governments would prefer to haggle over rates in private, as the current law provides.
By a 13-to-7 vote, the House Committee on Corporations, Insurance and Banking today approved the bill. Prospects for the bill before the full House, which is expected to take up the bill Friday or Monday, are uncertain, legislators said. The Senate passed the measure last year by one vote.
The bill is the outgrowth of several years of skirmishes between local governments and telephone firms that lobbyists said began with the breakup of American Telephone & Telegraph Co. and the resulting boost in local telephone rates. Local governments then began pushing for a break on their bills, saying they should not have to pay the same rate as businesses.
They argued that the rate is supposed to be based on outgoing calls -- and businesses and their employes tend to dial out a lot more than municipal workers. The governments also contended that the business rate is predicated on the assumption that the caller makes money using the telephone.
The telephone companies said they considered the complaints somewhat brash, given the fact that local governments are currently enjoying big increases in telephone taxes thanks to the higher telephone bills. "We said, 'You've got to be crazy,' " said William Watson, a spokesman for Continental Telephone Company of Virginia, the state's second-largest phone company. "You're getting a windfall."
For instance, Watson said, while higher telephone rates boosted the city of Manassas' telephone bills by $3,900 last year, they also brought the city an extra $54,100 in tax revenue.
Unable to persuade the telephone companies to lower their rates, a number of cities in 1983 began what one legislator called the equivalent of a "rent strike." They withheld part of their payments, then backed down when telephone companies refused to extend service or participate in any negotiations. J. Sydnor Phillips, a spokesman for the Chesapeake & Potomac Telephone Co., said cities withheld almost $1 million last year.
The phone companies went to state Sen. Dudley (Buzz) Emick (D-Botetourt), who agreed to sponsor a bill that would bring the SCC in on disputes involving cities -- but not counties or the state. While utilities don't generally plead for regulation, Emick said in this case "it will be cheaper and less onerous than to sit down and negotiate" with every disgruntled municipality in the state.
In pushing for the bill, the phone companies have put on the mantle of the consumers' protector. Watson and Phillips argue that avaricious municipalities will drive up the rates for everyone else if they can negotiate a lower rate for themselves, and that an impartial third party will help protect the consumers' interests.
That argument won the vote of Del. Gladys Keating (D-Fairfax). "My feeling is our rate payers have enough to pay for without paying what the cities and counties don't want to pay," she said.
Others, like Del. George Heilig (D-Norfolk), suggested that municipalities and phone companies try harder to work out a rate before coming to the SCC.