NASHVILLE - AT&T would be free to increase charges as it wishes on directory assistance, caller ID and regional calls between cities such as Chattanooga and Cleveland, Tenn., under a bill that deregulates most of the telecommunication giant's basic phone business in Tennessee.
The bill cleared a major hurdle in the House Banking and Utilities Subcommittee on Tuesday.
Rep. Gerald McCormick, R-Chattanooga, who is sponsoring the AT&T legislation, said he and other proponents are placing their faith in market forces to promote competition and drive down costs for consumers.
"What we're attempting to do is make sure that all companies, all competitors, have the opportunity to be regulated the same, to enhance competition and help consumers. That's the bottom line of this bill," Rep. McCormick told Banking and Utilities Subcommittee members.
The AT&T bill is one of several measures in the General Assembly this year dealing with deregulation.
Among them is a bill that would allow Tennessee gas distributors including Chattanooga Gas to boost charges by up to 4 percent without being subject to full rate-making proceedings by the Tennessee Regulatory Authority.
While proponents of such legislation say the marketplace better is able to protect consumers than government regulatory schemes, Nashville attorney Henry Walker alluded to recent federal regulatory debacles in the financial sector as a cautionary tale.
"Lax regulatory practices have brought us to the mess we're in now," said Mr. Walker, who represents both utilities and utility customers before the Tennessee Regulatory Authority. "It's hard to believe there are some people who want to continue down that same road here in Tennessee."
AT&T Tennessee spokesman Bob Corney said the company no longer is the monopoly it once was and faces telephone competition from the cable industry and cell phone services. The bill is intended "to allow us to compete with our competitors that now are not subject to any of the rules and regulations that we're subject to," he said.
Rep. McCormick said that "for 100-plus years (AT&T) was a monopoly so they needed to be heavily regulated. Now they have competition, particularly from Comcast and the cable companies."
Mr. Corney said AT&T is interested not in raising rates but in cutting them in order to meet its competition head on.
If AT&T did raise rates, he said, a disgruntled customer can say, "I don't like your service. I don't like your prices. I don't like your plan. I'm going to go to a competitor." Under the current regulatory scheme, he said, AT&T's competitors know the company's prices and can peg their rates just below AT&T's.
Rep. McCormick said if the freedom is abused, lawmakers could push regulation to address problems.
Tennessee Regulatory Authority Chairman Eddie Roberson said the AT&T bill "would remove most of the state oversight of AT&T" and would "move the company more to what they call marketplace regulation."
That is not necessarily bad provided there is real competition, Mr. Roberson said, noting, "my concern is there may be some areas where competition is weak." He said his main concern is in rural areas, a concern dismissed by Mr. Corney.
The AT&T bill has drawn opposition from cable operators and some competitive local exchange carriers. The carriers, who sometimes lease AT&T lines, are concerned the bill throws out state laws regulating how AT&T deals with them.
AT&T officials argued during Tuesday's debate on the bill that the regulatory authority still can hear disputes about anti-competitive actions under federal regulations. But opponents questioned whether that is enough and sought to insert a state standard.
"Clearly they're trying to skirt the state law's jurisdiction," argued Rep. Steve McManus, R-Cordova, whose amendment to deal with the issue was tabled.
Major changes in gas regulation are being pushed by Chattanooga Gas, Piedmont Gas and Atmos. The three-part bill would provide an annual review process. It would let the companies file reports showing their revenues, investments and expenses with adjustments for an increase.
Mr. Roberson said "we would check their arithmetic to make sure they actually spent it, and if they actually spent it we would approve an increase to offset their additional expenses." In a regular rate proceeding, he said, the company has to prove its expenditures were "prudent."
In last year's Tennessee American Water Co. case, Mr. Roberson said, regulatory authority directors disallowed a number of costs claimed by the company. That would not be the case under the bill, he said.
The gas companies' bill would allow the companies to push annual rate increases of up to 4 percent, he said, without going through the full-blown hearing in which customers and government agencies may contest an increase.
Tami Gerke, a spokeswoman for Chattanooga Gas' parent company, AGL Resources, argued that "under an annual review process, investor-owned natural gas utilities could potentially avoid lengthy and costly rate cases with these rate case expenses ultimately passed on to consumers."
She said the bill also promotes "meaningful conservations such as home weatherization, consumer education and rebates for high efficency appliances."
The legislation, House Bill 1349, is sponsored by Rep. Charles Sargent, R-Franklin, and Sen. Jack Johnson, R-College Grove.