C&P; seeks overhaul of phone rates Plan would cut fee for basic service, increase others


Chesapeake & Potomac Telephone Co. filed a proposal with state regulators yesterday to overhaul a wide range of charges, increasing many while reducing the cost of basic phone service for residential customers.

C&P;, which has 1.8 million customers in Maryland, proposed lowering its basic residential rate by up to 69 cents a month. The proposal also calls for cutting the cost of in-state toll calls as much as 21 percent.

But the cost of many services would increase, in some cases substantially.

According to C&P;'s proposal to Maryland's Public Service Commission yesterday, basic rates for business customers would jump to $13.48 a line from $10.36 a line, a 30 percent increase. The cost of individual calls would be reduced, however, to 9.5 cents from 10 cents.

If approved, the proposal will affect virtually all phone customers in Maryland, many of whom might reassess whether to keep many optional services in light of the new charges. In the case of basic service, however, customers can obtain service only through C&P.;

The PSC is expected to decide on C&P;'s request by the end of the year after holding public hearings.

People's Counsel John M. Glynn, who represents the interests of ratepayers before the commission, said C&P;'s voluminous filing

was long on support for raising some rates but short on discussing why current rates aren't falling faster.

Mr. Glynn noted that a $1.7 billion investment by C&P; to upgrade its network in the past few years, partly financed by ratepayers, was intended to result in a more efficient operation.

The implied promise by C&P;, he said, was that charges to customers ultimately would fall as a result of those investments.

Other phone companies in other states have used the same argument, and rate reductions have followed.

C&P;, meanwhile, has prospered thanks to those improvements, which have allowed the company to offer a variety of new, revenue-generating services.

"C&P; is saying rates will go down, and they ought to," Mr. Glynn said. "The question is: Should they be going down more?"

According to C&P;, the proposed changes, although dramatic in some cases, won't generate any more revenue. But the company maintains the changes are needed to keep basic residential phone rates from going up.

C&P; noted in its filing that basic telephone rates in Maryland haven't increased since 1985, which was the last time the commission reviewed C&P;'s rates. Basic rates have decreased twice since then and have held steady at $16.15 a month since 1989.

That puts Maryland above the national average for basic telephone service, which was $13.05 in October 1991, according to the Federal Communications Commission.

Under the C&P; plan, the cost of basic residential service would drop from $16.15 a month to $15.96. Some residential customers, depending where they lived, would receive an additional reduction of 20 cents to 50 cents, for a maximum cut of 69 cents.

The cost of some optional services would increase under the C&P; plan.

Call waiting -- one of C&P;'s most popular services -- would jump to $4.25 from $3.50 for residential customers.

Charges for three-way calling would increase to $4 from $3.50 per month. Both repeat call and return call, which now cost $2 and $4 a month, respectively, would increase by $1 a month.

C&P; also wants to reduce the discounts it offers on package deals, which are popular among consumers because they offer cut rates on optional services.

The C&P; plan calls for the cost of deals that package two or more optional services to increase by as much as 35 percent. Discounts extended to consumers who buy the packages, in some cases, would be cut in half.

The cost of tone service, still considered optional, would remain unchanged at $1.25 a line per month. The company also 'D proposed no change in the $3.50-a-month cost of call forwarding.

But businesses would be among the hardest hit by the C&P; proposal.

Beside the 30 percent jump in basic rates, the cost of call waiting for business customers would rise to $5.25 from $4 a line per month, and call forwarding would increase to $5.50 from $4. Repeat call and return call would rise $1 each from the current $2.50 and $4.50 a month, respectively.

C&P;'s filing contained one bright spot for business and residential customers: The cost of in-state toll calls would be reduced by an average of 10 percent for residential customers and 21 percent for business customers.

That means that Baltimoreans who now pay a toll for calls to, say, Laurel, which is outside the local calling area, would get a price break under the C&P; proposal.

Similarly, businesses whose employees regularly call outside their local calling areas would pay less under the plan.

Yesterday's filing is part of an agreement reached two years ago by the company, the PSC and the People's Counsel that loosened regulation of C&P; in exchange for the company's agreeing to freeze basic rates. The agreement required C&P; to submit yesterday's rate filing.

Under the plan, C&P; wants the commission to extend "incentive regulation" for six years to ensure the long-term financial health of the company.

Incentive regulation, which was instituted two years ago by the commission on an experimental basis, is a more relaxed form of regulation that grants the phone company some discretion in pricing certain services.

Before incentive regulation, C&P; was required to complete a long approval process any time it wanted to change rates. Under incentive regulation, C&P; can change rates for services that have been deemed "non-competitive," meaning customers can buy them from companies other than C&P.; That would include services such as Answer Call, C&P;'s version of the answering machine.

Frederick D. D'Alessio, president and chief executive officer of C&P;, said the company needs the predictability of incentive regulation for at least the next six years so that it can plan its capital expenditures accordingly.

"This will give us the financial incentive to invest in the state," Mr. D'Alessio said.

C&P;'s proposal will be scrutinized this summer by the commission as part of a regularly scheduled rate case.

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