Saturday, March 21, 1998
Agreement gives Bell
flexibility to compete

BY MIKE BOYER
The Cincinnati Enquirer

At first glance it doesn't appear Cincinnati Bell Telephone got a lot in the tentative settlement of its year-old plan to restructure its residential and business rates.

Q&A
How the settlement
will effect customers
The agreement with various business and consumer groups, which must be approved by the Public Utilities Commission of Ohio, calls for a freeze on basic residential rates through at least July 1, 2001, and calls for an estimated $12 million reduction in company's rates to $336 million annually.

CBT's original proposal, called Commitment 2000, while leaving total revenues basically unchanged, would have meant rate hikes of about 14 percent for residential customers and rate cuts of a similar amount for business customers.

CBT said it needed the rate rebalancing to eliminate the subsidies historically built into residential rates while reducing rates for business customers who are increasingly being courted by new competitors.

The settlement reached late Thursday still cuts CBT's business rates by an estimated $4 million. The remaining $8 million in reductions are access charges CBT receives now from long-distance carriers using its system.

But the agreement also gives CBT increased flexibility to compete with the host of new telecommunications companies entering the Cincinnati market.

''We got considerable flexibility to introduce new services and price them like our competitors,'' said Gene Baldrate, CBT's vice president of regulatory affairs.

Mr. Baldrate said CBT is still evaluating which of those new services make the most business sense, but they include things like expanded Internet capabilities and the ability to control calls away from the home or office.

Carrie Cornist, of Communities United For Action, a coalition of 46 area community groups that was part of the settlement negotiations, also hailed the agreement.

''Not only did we beat (CBT's) rate hike, but low-income customers are getting money back,'' she said.

Under the agreement CBT has agreed to expand its pilot Lifeline program, which provides reduced-rate basic phone service to low-income customers into a permanent program. The new agreement expands CBT's commitment to that program from about $100,000 annually to as much as $1.1 million.

The new rate plan, the result of several months of negotiation between CBT and various interest groups, also doesn't limit what CBT can earn from the services it provides.

Historically, under ''rate of return'' regulation, utility earnings were limited to a certain percentage of the rate base in their service area.

''If we're smart and good competitors we can retain the benefits (of rolling out new services),'' Mr. Baldrate said.

The new plan also simplies CBT's rate structure by eliminating the current patchwork of rates based on the customer's distance from a central office in favor of three geographic rate bands for all business and residential customers.

The new rate plan also gives CBT the option to extend the agreement and the residential rate freeze until 2003 if it remains in compliance with certain service quality benchmarks.

Those benchmarks, which cover things like the number of trouble reports per 100 access lines, percentage of repair reports cleared in 24 hours and repair appointments met on time, have to be better than 95 percent annually for the agreement to be extended.

The PUCO staff report last fall recommended CBT meet a 99 percent benchmark on service quality. CBT is also required to file reports twice yearly showing its performance.