AT&T: SBC offering predatory rates in Kansas

(Telephony) AT&T has filed an emergency motion with the Kansas Corporation Commission asking it to suspend some of the tariffs filed by SBC for its recently approved long-distance service in the state.

At issue are SBC’s intrastate rates below 9.4 cents per minute. AT&T believes that 9.4 cents is SBC’s cost for providing intrastate long-distance service, and claims any rates below that are predatory.

“We’re not challenging their lead offer of 10 cents a minute,” said an AT&T spokesman. “But it’s spelled out pretty clearly in the Telecom Act that you can’t price services below cost. We think we have a good legal case that they have done so.”

AT&T also wants the commission to address SBC’s access charges, which the long-distance company says are exorbitant and designed to create a price squeeze.

“Access charges remain an issue,” the AT&T spokesman said. “Five cents of their 9.4 cent cost are access charges. So, when they provide long-distance service, they pay themselves the 5 cents; it just goes from one pocket to the other. When we provide long-distance service, we pay them the 5 cents.”

The spokesman added that AT&T had a similar problem in Texas, where it was paying access charges of 12 cents per minute, and eventually got the PUC to cut the access rate to 6 cents per minute. AT&T hopes for similar consideration in Kansas.

“Access fees and predatory rates are intertwined issues,” said the AT&T spokesman. “SBC has us in a price squeeze, and it is hard for us to compete when we pay 5 to 6 cents of our long-distance rate to [them]. In Texas, one of our rates is 7 cents [a minute]. We only make a penny, because we’re paying SBC 6 cents. Compare that to interstate rates—which are set by the FCC, not state commissions—which are much lower.”

SBC counters that AT&T’s claims and subsequent legal maneuvers are without merit and designed to keep SBC out of the long-distance markets.

“AT&T should start competing and stop litigating--that’s the bottom line,” said an SBC spokeswoman. “This is just another attempt to keep us from entering a market they have virtually monopolized. They have tried every trick in the book.”

SBC believes that it has precedent—and documentation—on its side in this particular battle.

“The FCC has concluded on three different occasions that adequate safeguards exist to prevent price squeezes and that LECs and their affiliates are unlikely to successfully engage in price squeezing,” the spokeswoman explained. “Moreover, we are totally prepared to show that our pricing exceeds our cost.”

Given the competition that exists in the long-distance space, SBC believes it would be virtually impossible for any company to achieve a predatory position.

“Pricing is not predatory unless it helps a company achieve monopoly status that it can use to keep competition out of the marketplace,” the spokeswoman explained. “No company could possibly recoup the start-up losses it would incur by selling long-distance service below cost.”

Also, the SBC spokeswoman added that long-distance service providers must periodically show ‘Track A’ compliance, which is an element of Section 271. How often a service provider must do so depends on the state commission, but it is typically every six months, according to the spokeswoman.

“You’re not going to see competition eliminated, because too many safeguards are in place. It is documented that long distance is a vigorously competitive marketplace. Companies have meaningful opportunities to compete and are doing so.”