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CWA Tells FCC: Block Alltel Bid to 'Game the System'
The Federal Communications Commission should reject Alltel Corp.'s request for a waiver of FCC rules because of that company's practice of "gaming the system" and using profits generated by local telephone operations to subsidize other non-regulated businesses, the Communications Workers of America told the commission.
Previously, the FCC has noted that allowing local exchange companies to "go back and forth between rate of return regulation and price cap regulation"- as Alltel now hopes to do- could "game the system by building up a large rate base under rate of return regulation, then opting for price caps which rewards carriers for making efficiency gains."
Alltel hasn't shown any valid justification for continuing to operate under "rate-of-return" regulation upon completion of the Aliant Communications Inc. merger, the CWA filing pointed out. But Alltel has shown a pattern of using its local telephone company operations "to game the system" and subsidize its other non-regulated subsidiaries, it noted.
To ensure that telephone rate payers are not subsidizing other Alltel operations, each regulated telephone subsidiary should contribute only its "fair share" of profits in the dividend payment it makes to corporate parent Alltel, the filing stressed.
But "in 1997, Alltel diverted to its parent corporation $42.8 million in `excess dividends' generated from its local telephone operations under rate-of-return regulation," the CWA filing noted. Alltel's telephone subsidiaries represented 27.7 percent of total corporate shareholder equity, but contributed nearly half- 48.5 percent-in dividend payments to Alltel in 1997.
"Should the commission grant Alltel's waiver request, based on Alltel's established pattern of extracting excess dividends from its local telephone operations, Aliant would likely contribute $12.1 million in excess dividends to the corporation after the merger is completed," the CWA filing pointed out.
CWA represents some 630,000 employees in telecommunications and other industries, including about 700 at Aliant Communications and 1,000 at Alltel.
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Previously, the FCC has noted that allowing local exchange companies to "go back and forth between rate of return regulation and price cap regulation"- as Alltel now hopes to do- could "game the system by building up a large rate base under rate of return regulation, then opting for price caps which rewards carriers for making efficiency gains."
Alltel hasn't shown any valid justification for continuing to operate under "rate-of-return" regulation upon completion of the Aliant Communications Inc. merger, the CWA filing pointed out. But Alltel has shown a pattern of using its local telephone company operations "to game the system" and subsidize its other non-regulated subsidiaries, it noted.
To ensure that telephone rate payers are not subsidizing other Alltel operations, each regulated telephone subsidiary should contribute only its "fair share" of profits in the dividend payment it makes to corporate parent Alltel, the filing stressed.
But "in 1997, Alltel diverted to its parent corporation $42.8 million in `excess dividends' generated from its local telephone operations under rate-of-return regulation," the CWA filing noted. Alltel's telephone subsidiaries represented 27.7 percent of total corporate shareholder equity, but contributed nearly half- 48.5 percent-in dividend payments to Alltel in 1997.
"Should the commission grant Alltel's waiver request, based on Alltel's established pattern of extracting excess dividends from its local telephone operations, Aliant would likely contribute $12.1 million in excess dividends to the corporation after the merger is completed," the CWA filing pointed out.
CWA represents some 630,000 employees in telecommunications and other industries, including about 700 at Aliant Communications and 1,000 at Alltel.
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