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Louisiana Nixes PriceCap for Local Telecom

Fortnightly Magazine - May 15 1995

The Louisiana Public Service Commission (PSC) has turned down a request from South Central Bell, a telephone local exchange carrier (LEC), to switch its form of regulation from the existing incentive-based rate plan to a pure price-cap plan. Under its proposed plan, the LEC would freeze rates for basic residential services for a three-year period, and then cap rate changes based on the rate of inflation. Rates for interconnection and nonbasic services would be market-based. Unlike some price-cap plans employed in other jurisdictions, South Central Bell's plan contains no explicit productivity offset to restrain price increases for capped services.

The PSC ruled that the LEC had failed to show that competition was commonplace in the state's telephone market. It also found market forces not currently sufficient to discipline prices. In addition, the PSC said that the plan lacked anticompetitive safeguards and that the grouping of services under "market baskets" proposed by the LEC were not designed to promote competition. Re South Central Bell, Order No. U-17949-Subdocket D, Docket No. U-17949 (Subdocket D), Mar. 2, 1995 (La.P.S.C.).


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