[BETA] Fortnightly

The North Carolina Utilities Commission (NCUC) has approved price-cap regulation plans for four major telecommunications local exchange carriers (LECs) in the state: BellSouth Telecommunications Inc. (BellSouth), Carolina Telephone and Telegraph Co. (Carolina), Central Telephone Co. (Central), and GTE South, Inc. (GTE). The NCUC rejected allegations by AT&T Communications of the Southern States, Inc., an interexchange carrier (IXC), that a separate "general rate case" was needed to gauge how the shift to price regulation affected LEC earnings. The NCUC declared that a scheduled review of each plan after five years and a requirement that the LECs file annual earnings surveillance reports adequately protected the public. Further, it directed IXCs in the state to reduce long-distance rates to reflect reduced access charges under the price-cap plans.

A wide-ranging telephone reform bill passed by the state legislature in 1995 directed the NCUC to open the local telephone market to competition and to permit LECs to switch from traditional rate-base/ rate-of-return regulation to price regulation.

The BellSouth plan reduces rates by $60 million; the plan approved for Carolina and Central reduces rates by $30 million. (The GTE plan does not include rate reductions.) Both eliminate touch-tone charges and significantly reduce access charges for IXCs. They also require the IXCs to pass through the access-charge reductions to their customers in the form of "dollar-for-dollar" reductions to rates for intrastate basic message toll service. At the same time, the NCUC confirmed its established policy of pricing LEC access charges and other nonessential service elements above incremental cost to allow the LECs to price basic service at an affordable rate. The NCUC emphasized the need for caution on pricing issues "so that the desire to increase services and reduce costs in the lucrative highly competitive sectors of the business does not result in an unexpected and socially unacceptable rise in the cost of essential service necessary to everyone." Re BellSouth Telecommunications, Inc., Docket No. P-55, Sub 1013, May 2, 1996 (N.C.U.C.); Re Carolina Telephone and Telegraph Co. and Central Telephone Co., Docket No. P-7, Sub 825 and Docket No. P-10, Sub 479, May 2, 1996 (N.C.U.C.); Re GTE South Inc., Docket No. P-19, Sub 277, May 2, 1996 (N.C.U.C.).

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