AT&T Will Need to Walk a Fine Line with its New Freedom on Rates

Implications: 1.      To call the action by the North Carolina Utilities Commission “a landmark decision” is no exaggeration. 2.      It could have implications for states nationwide. 3.      Still, AT&T was not able to get price flexibility for basic residential services.  

Analysis:  Apparently, AT&T was able to convince the NC PUC that there is more than enough competition in the state for residential calling features that are not basic as well as for all business services.  Of course, that is where the profits for the RBOC are generated.   

AT&T was unable to get free reign on standard monthly billing to residential customers. But its desire went beyond “the flexibility to quickly respond to discount promotions marketed by competitors.”  The carrier was probably just as interested in the ability to jack up rates in areas that have minimal competition with the rationale that more capital is needed to maintain those outer suburban and rural areas.   

It is no coincidence that AT&T targeted North Carolina first because the state public and private agencies really do not have a reputation for being excessively tough on the telcos.  On the other end of the spectrum, there is California, which is a hotbed of consumerism – and it will likely require a guarantee that if the RBOC lowers its rates, it will have to be statewide – it cannot be area by area.  In between the two extremes, AT&T will be able to point to the North Carolina precedent and it could be quite successful in getting similar relief in other states.   One potential minefield with more freedom is when it comes to unbundling.  AT&T may   be tempted to up the ante regarding raising costs to competitors for its facilities.  The big question is how far the service provider would be able to go before the consumer groups come down on the company.   

A big factor that could at least partially undermine the benefits from state deregulation is increased regulation by the federal government on rates.  Right now, AT&T has a rather compelling argument -- since the U.S. government takes a hands-off approach, the states should do likewise.  But the situation could change substantially with the national elections.