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Telecom Battle Under Way With Proposed Colorado Overhaul

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(credit: centurylink.com)

(credit: centurylink.com)

CONTEST

DENVER (AP) – Colorado lawmakers want to drastically change a ratepayer subsidy for telephone providers that once supported underserved areas but that now, critics say, is being wasted on places with plenty of consumer options.

One of the biggest pieces of legislation this year pits AT&T Inc. and smaller providers against CenturyLink Inc., which has received the bulk of the subsidy and stands to lose most of it under the bill.

The legislation has support from Republicans and Democrats and has its first hearing Monday.

The proposal would eliminate subsidies in places where 90 percent of customers have at least five telecommunications providers. Providers working in less competitive areas would still be eligible for the fund.

The current fund disbursed an estimated $54.3 million last year – more than 90 percent of it to CenturyLink, which covers most of Colorado’s rural areas. CenturyLink acquired Qwest Communications International Inc. in 2011.

Bill supporters say the current rules don’t reflect today’s marketplace. Republican Rep. Carole Murray, a co-sponsor of the bill, describes it like this: “It’s like handing a subsidy to Burger King when they are competing in an area where there’s a McDonald’s, a Wendy’s, a Carl’s Jr. and a Sonic.”

CenturyLink argues that providing telephone service in remote parts of the state is expensive and that reducing its subsidy will mean its 418,000 rural customers will pay higher rates for their landlines.

Jim Campbell, CenturyLink’s regional vice president for legislative affairs, warned that the company may have to cut jobs or decide it’s not economically feasible to provide service in some places without the subsidy.

William Soards, AT&T’s president in Colorado, said other companies are willing to step in if that’s the case.

“There’s plenty of competition out there that will be very excited to take their business, and AT&T will be one of them,” he said.

CenturyLink said the bill as written would make it the only company to have to prove it is serving areas with fewer than five competitors. Other companies would stay eligible under a part of the bill that exempts those with fewer than 75,000 local service lines.

“At this point, of the winners and losers, on the bill the way it’s written now, CenturyLink is only party that seems to be losing revenue. Everyone else seems to be made whole,” Campbell said.

The fund was created in the early 1990s at a time when most people used landlines. Consumers pay 2.9 percent of their phone bills toward the fund, or 87 cents for a $30 bill, according to CenturyLink. The fund is administered by the Colorado Public Utilities Commission.

Under the bill, the fund would be phased out by 2025, with consumers gradually paying less into it. At the same time, lawmakers want to use the money for a fund that would help expand broadband coverage in rural areas. That fund would eventually reach $25 million, and it would be administered by the governor’s Office of Information Technology.

CenturyLink said it uses the ratepayer subsidy for infrastructure and maintenance in hard-to-reach areas and that it provides the utilities commission financial statements on what it costs to service those places. Murray insists there’s still no way to ensure the money is being used properly.

Formerly rural areas – such as Castle Rock and Parker south of Denver – are now suburbs, but providers there are still eligible for the subsidy. CenturyLink maintains that in Parker’s case, the company received just $18,000 in 2011, a tiny fraction of 1 percent of the fund.

Colorado’s fund is the third largest in the country, behind California and Texas, Murray said.

- By Ivan Moreno, AP Writer

(© Copyright 2012 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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