AT&T Fights Rural MN Phone Co’s, Millions at Stake

The state's rural phone companies say that cutting the "access charges" that they get from long-distance companies would force them to raise rates for consumers-but AT&T says those companies have to address a shrinking revenue stream anyway as mobile phone use displaces land lines.

AT&T is leading the charge in a multimillion-dollar fight against Minnesota's rural phone companies, which say the outcome could force them to raise rates for their consumers.

Dallas-based AT&T ultimately wants to significantly reduce the “access charges” that it and other long-distance providers pay rural phone companies to deliver their in-state long-distance calls. Long-distance providers pay such fees to local companies instead of building their own network in rural areas.

Long-distance providers collectively pay $38 million annually to the 87 members of the Minnesota Telecom Alliance, a St. Paul-based trade association that represents rural phone companies, according to Brent Christensen, president and CEO. But the amount at stake in the fight is actually much greater than that because the access charges collected by two larger local phone providers-Qwest and Frontier Communications Company-aren't included in that figure as they aren't among the organization's members.

Christensen said that access charges comprise between 20 and 40 percent of rural phone companies' income. If those companies lose such a big chunk of their revenue stream, they'll be forced to recoup losses by raising rates for their customers.

Bob Bass, AT&T's Minnesota president, said in a Thursday phone interview that the current access charge system needs to be reformed, adding that it costs more for someone in the Twin Cities to call Duluth, Minnesota, than it does to call Duluth, Georgia, because of the state's outdated access-charge system. The system was devised by the federal government in the 1980s as a way to subsidize rural phone companies-which were presumed to shoulder greater operating costs because their customers were more spread out geographically.

Bass said that some rural phone companies don't need the money, and the ones that do are already poised to lose revenue because minutes of phone use have been dropping at a rate of 35 percent in recent years as mobile phone use continues to jump. Whether the access charges remain at their current levels or drop, those companies will have to come up with a solution to address their revenue shortfall, he said. “This is a solution that provides certainty,” he said about the proposal to cut access rates.

Bass said that AT&T wants access charges lowered so that it can cut long-distance rates for consumers, adding that consumers in several states where access fees have already been reformed have seen a penny-for-penny decrease in their long-distance service. Christensen, however, is convinced that long-distance rates won't go down. “That's not their track record,” he said about AT&T.

AT&T has long tried to get the Minnesota Public Utilities Commission to reduce access charges. But after no success, it now plans to support a bill favoring its push that will be introduced in the Minnesota House in a few weeks. Christensen hopes that the bill doesn't gain steam, adding that the Federal Communications Commission (FCC) is already looking at how to regulate all forms of voice communication. After the agency comes up with a plan, Christensen and members of his organization plan to introduce their own proposal-one “that would benefit everybody,” he said.

AT&T's charge only applies to access charges for in-state calls: Interstate access charges are lower than in-state ones and are regulated by the FCC. The fight also doesn't involve wireless or Internet phone communications as those access charges are levied differently.

Telecommunications analysts and insiders have been calling for the present access-charge system to be revised for about a decade. Christensen doesn't argue that the system needs to be reformed because a lot has changed within the past few decades. But he's adamant that the best plan will “have something that's in it for the end-user, the consumer.”

“Only the long-distance companies stand to gain from this” proposal, he said.