Battle looms over Sprint’s bid for rate hike

Thursday, Feb. 18, 1999 | 11:26 a.m.

Sprint is seeking a 54.9 percent rate increase for Las Vegas residential phone service and a 23.9 percent hike for business lines.

Rate increases would boost basic residential service from $7.10 a month to $11 and the cost of a business line from $16.30 to $20.20 a month.

The rate proposals were filed Wednesday with the Public Utilities Commission of Nevada. Sprint hopes for a decision by July 1.

Lou Emmert, vice president and general manager of Sprint in Nevada, said the $3.90-per-month increases would generate $30 million a year and are necessary to finance growth in the telephone system's infrastructure.

But Fred Schmidt, state consumer advocate, said the rate increases wouldn't occur without a fight. He questioned whether Sprint even had the legal authority to ask for a rate increase because the company signed an agreement pledging to freeze rates for five years in 1995.

"The first thing we're going to evaluate is if legally they can even pursue this," Schmidt said. "We'd like to get a legal opinion before we start putting together a staff analysis about the rates themselves."

Schmidt said that when the company's last rate increase was approved, the company was given the option of locking in rates for three, four or five years in a Plan of Alternative Regulation (PAR). In the $4 million rate increase, which amounted to a 35-cent increase per customer (75 cents for businesses), Sprint agreed to participate in a five-year PAR that would run through June 30, 2000.

In announcing its rate proposal, Sprint also said it extended its PAR agreement through June 30, 2002. Locking in rates on an extended basis helps the company with long-range planning and gives Sprint added flexibility in pricing custom features, such as call waiting and caller ID.

Emmert said that when the PAR began in 1995, Sprint expected to spend $375 million during the five-year term of the plan. Instead, Sprint has seen a 30 percent growth in customer access lines, boosting capital spending to $457 million in three years. "But Sprint shouldn't be building their infrastructure on the backs of basic dial-tone customers," Schmidt said.

Sprint argues that it isn't basic dial-tone customers who are responsible for the exponential growth in Southern Nevada. About 47 percent of all new Sprint installations in 1998 were requests by existing customers for additional lines. The national average for residential phone lines per household is 1.5. In Las Vegas, Sprint builds its network to accommodate three lines per household.

About 20 percent of Sprint's residential customers have multiple access lines.

"People in Las Vegas like all the bells and whistles," Rob McCoy, a Sprint representative, said. "When the newest technology becomes available, there is great demand here."

Emmert said separate lines for other family members, fax machines and Internet access has driven most of that demand.

Of the $172 million Sprint forecasts it will spend on infrastructure in 1999, about $15.5 million will go toward retrofitting existing neighborhoods with additional lines.

And in response to criticism that fixed-income customers would be forced to pay more if the rate increase is approved, Sprint offered a rate freeze on customers getting basic residential service without any of the extras. For the approximately 55,000 customers in that category, phone service would be locked in at $8 a month beginning June 30.

Lifeline, a special rate offered to welfare recipients within Sprint's service boundary, would stay at $4.24 a month for existing customers and $6.25 a month for new participants.

Sprint characterizes telephone service in Southern Nevada as one of the greatest utility bargains in the country.

Although the company received a 35-cent rate increase in 1995, it took monthly residential rates up to $7.10. That's a dime per month less than the phone rate was in 1965, Sprint officials said. Over the years, there have been some rate reductions as well as increases.

Comparatively, an $11 residential rate is still favorable to rates in most other cities in the West, Sprint said.

Nevada Bell offers Reno residents a $10.75 monthly rate. But GTE offers phone service for $17.25 a month in San Diego and US West is available in Salt Lake City for $14.29 a month and $13.43 a month both in Phoenix and Tucson, Ariz.

Schmidt believes Sprint may be positioning itself to dominate future competition, although some would argue that the company already does. It has about 96 percent of the local residential telephone market share in Southern Nevada.

"They wouldn't be able to get away with these kinds of rate increases in a truly competitive market," Schmidt said. "This shows me that competition may be growing a little slower than we thought it had."