Should California send more money to Texas?

San Diego Business Journal, July 22, 2002 by Mike Jackman

"You don't need a weatherman to know which way the wind blows," said Bob Dylan, and we know that these days, its blowing money from California to Texas.

First, you'll remember, it-was Houston-based Enron manipulating the energy market and taking excess money from California ratepayers.

Now another wind is threatening to blow toward Texas again this time to San Antonio, where SBC Communications, owner of Pacific Bell, is manipulating the California Legislature to reap a windfall the size of a small country's gross national product. Worse, this windfall will come straight out of the pockets of California consumers and fund SBC's anti-competitive and predatory campaign against competing phone companies and Internet service providers.

The California Senate should say "no" to this corporate giveaway.

Some background: The state Assembly a few weeks ago passed AB 2958, legislation backed by SBC Pacific Bell and Verizon. The bill allows these national phone companies to keep excess monopoly profits they would otherwise have to rebate back to California consumers and businesses.

$3 Billion Loss To Consumers

Nothing in the bill requires either company to reinvest its California profits back into the state's communications network or employment base. The California Office of Ratepayer Advocates estimates consumers could lose up to $3 billion, or about $90 per residential/business customer, in lost profit sharing if AB 2958 becomes law.

One of AB 2958's more insidious provisions renders ineffective regular state audits of SBC Pacific Bell's finances. A recent survey from the state's Office of Ratepayer Advocates showed that SBC, in the best traditions of Texas-style accounting, understated Pacific Bell profits by $2 billion in recent years.

In addition, this bill severely limits the California Public Utility Commission's ability to regulate these two monopoly phone companies. This leaves not only consumers, but also small Internet service providers vulnerable to being gouged or priced Out of the market by Pacific Bell's own broadband company, Pacific Bell Internet.

Destructive To Competition

If enacted, AB 2958 has the potential to destroy what little local phone competition there is. The playing field, already tilted in favor of SBC and Verizon, stands to get a lot more lopsided. Competition is responsible for providing improved services and products at steadily declining prices.

But the companies that compete against SBC and help keep prices down cannot expect to survive against a cash-rich and aggressive monopoly if AB 2958 passes. Which is why the state Senate needs to stand up for consumers and competitors.

Despite Pacific Bell's lobbying success in ramming this bill through the Assembly, AB 2958 has drawn opposition from all quarters, including the California Public Utilities Commission, consumer groups, trade associations and businesses. But it is the Senate that has the power to protect us. We think the Senate is ready to take that step.

Let's disprove the dictum that "everybody talks about the weather, but nobody does anything about it." Contact your state senator now and urge him or her to vote no on AB 2958 before it is too late.

Jackman is executive director of the California ISP Association.