US West has had increasing problems with government regulators throughout its fourteen-state territory. Last week the Colorado PUC staff recommended that the phone company's request for a 20 percent hike in residential rates be denied. The staff rejected US West's claim that it was losing money on residential service. The Colorado commissioners will make a final decision on the proposed rate hike this winter.
If they deny the rate increase, Colorado regulators will join those in other states who have turned down US West's proposed rate hikes. Washington state regulators were so incensed by US West's plan to double residential rates that they ordered the company to slash the price of local phone service to just $10.50 per month. Many phone customers in Washington have experienced long delays in getting new service, and US West's service record became an issue there. In Iowa, the state utilities board also turned down US West's proposed 23 percent hike in residential rates.
US West has long claimed that residential telephone service is being subsidized by its business customers, who pay more than twice as much per line. However, many consumer advocates and government regulators dispute this claim and estimate that it costs the phone company as little as $4.42 per month to serve each home telephone line.
Ken Reif, director of the Colorado Office of Consumer Counsel, has contended that US West wants to shift the cost of maintaining its entire system onto residential customers, who have no alternative to the phone company. Another official in the Office of Consumer Counsel has said the company intends to use "captive customers to raise revenue." And US West wants to fill its coffers, in part to meet the looming competition for business customers.
MCI and other companies are expected to offer lower rates to business customers than those currently charged by US West. Consumer advocates fear that residential customers will wind up making up the difference for US West in the resulting price war. And they're not heartened by pronouncements from US West officials. This past February, president and CEO Solomon Trujillo told a group of US West officials that the company's goal is to "improve net cash flow by $1 billion by 1998." He added, "I'm on a mission to generate cash."