Telephone co-ops may soon face fiscal blow

On February 28, 2011, in News 2011, by Mark Norris

White County customers could potentially suffer repercussions

By Kim Swindell Wood,
February 28, 2011

A telecommunications bill introduced in Tennessee House of Representatives could reportedly have a major financial impact on public utilities and telephone cooperatives, including those that serve White County.

Senate Bill 598/House Bill 574 requires parity between the rates and rate structures applied to an entity’s interstate and intrastate “switched access” services. Action on the bill has been deferred until March 1, 2011.

According to the legal wording of the legislation, the bill prohibits any public utility or telephone cooperative that provides switched-access service for intrastate toll telecommunications services from imposing intrastate switched-access charges that exceed the interstate switched-access charges imposed by the entity.

An access charge is a fee paid by long distance providers for each call carried over a local phone company’s network. If passed, the bill would reportedly reduce the amount paid by AT&T and other long distance companies to use Ben Lomand’s network. Rural telephone companies and cooperatives have relied on access fees since the Federal Communications Commission broke up the Bell System monopoly in 1984.

“At that time, state and federal authorities recognized that small companies must be paid for the investment they are making in the rural areas,” said former Ben Lomand CEO Levoy Knowles, in a statement issued in a recent press release. “It’s not a tax on urban customers, but the way the small companies get reimbursed for the use of their networks. And the current access rate has long been acknowledged as fair and reasonable by state and federal regulators.”

According to Ben Lomand Telephone, the company’s lost revenue would be almost $2 million per year, which is the equivalent of 15 percent to 25 percent of its workforce.

This figure reportedly increases to an estimated $12-$15 million per year when all Tennessee rural cooperatives and independents are taken into consideration. According to the press release, no mechanism exists for making up that shortfall, except higher rates for the consumer, which Ben Lomand considers “a most unwelcome” alternative.

“The loss of this revenue would mean not only a loss of jobs, but also of capital,” said Ben Lomand CEO Trevor Bonnstetter. “The cooperative model has always been about putting money back into the communities where our membership lives. That money is used to hire employees, invest in our communities and maintain modern telecommunication services and technology. Passage of this bill would severely impact our ability to continue to help drive the economy in the areas we serve.”

Providers like Ben Lomand install and maintain their networks over large areas that can entail rough terrain. Ben Lomand covers 3,200 square miles of diverse territory. According to the press release, the company’s potential loss of jobs would lessen its ability to effectively deal with the outages that are often cause by heavy storms. Population density also plays a part. With fewer residents per square mile, a rural cooperative reportedly cannot match the revenues of urban providers and their huge population base.

“This bill,” says Bonnstetter, “threatens to take money from our communities, our cooperative and its members. No part of it is in the best interest of Tennessee and Tennesseans.”

The bill was placed on the Feb. 22, 2011, agenda for the Senate’s Commerce, Labor and Agriculture Committee. However, action was deferred to the committee’s March 1, 2011, meeting.

This bill is sponsored by State Senator Mark Norris (Republican), of Collierville, and State Representative Gerald McCormick (Republican), of Chattanooga.

Co-sponsors of the bill represent both the Democrat and Republican parties.


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