Sprint sues state, potential rivals over access fees

Grace Leong

Wednesday, Oct. 6, 1999 | 11:02 a.m.

Sprint sued the state and five potential Las Vegas competitors, seeking a hike in the rates it's allowed to charge the competitors for leasing Sprint telephone lines.

In a District Court suit, Sprint said the Public Utilities Commission without "rational explanation or justification" cut the loop access rate from $13.89 to $10.83 per month, a rate it says does not allow it to recover the costs of building and maintaining the loops.

A loop is the line that connects Sprint's switch or local telephone exchange with customers' premises.

"The debate is essentially over the information used in calculating the cost of the loop," said Rob McCoy, Sprint's spokesman. "Why would Sprint lease its loops to its competitors at a cost that is below the actual cost it would take us to build and maintain the loops?"

The suit was filed as Kansas City-based Sprint, the dominant phone company in Las Vegas, agreed in an unrelated development to be acquired by MCI WorldCom for $129 billion.

Sprint sued the PUC, Commissioners Donald Soderberg, Judy Sheldrew and Michael Pitlok; AT&T Communications of Nevada Inc., Nevada Bell, Nextlink Nevada, MGC Communications Inc., the Nevada State Cable Television Association, Cox Communications Las Vegas Inc., the Office of the Attorney General, the Bureau of Consumer Protection and the Utilities Consumers' Advocate.

Under the Telecommunications Act of 1996, which is designed to foster competition in the local telephone service markets, existing telecommunications providers like Sprint must offer the use of their lines to competitors to help them reduce their costs of market entry and operations, the suit said.

"Sprint is pro-competition. But at what point or price does it become punitive for us? We believe we've come to that point and that's why we are seeking judicial relief," said McCoy.

But the PUC disputed Sprint's allegations.

"A lot of the company-specific cost inputs the PUC adopted in determining the $13.89 loop rate were reversed because those inputs are not supported by the records after we took a second look," said Charles Bolle, the agency's telecommunications policy adviser.

The suit said the PUC conducted a number of proceedings between December 1997 through June 1998, which included getting cost studies from Nevada Bell, AT&T and Sprint and conducting evidentiary hearings between September 1998 through March 1999 to determine the loops' costs and pricing standards in Nevada.

The suit said the PUC had on May 11, 1999, adopted cost inputs proposed by its own staff and also some supported by Sprint, to ensure that the fast-growing urban nature of Sprint's service area would be reflected in the cost structure on which loop rates were to be based.

Bolle said the PUC reexamined Sprint's cost inputs on July 6 to see if these were supported by Sprint's testimony, work papers and documents submitted in June 1998, after AT&T, Nextlink and MGC Communications -- which he said believed the $13.89 loop rate was too high -- filed a petition for reconsideration.

"It appeared the record was very thin in supporting the cost inputs that Sprint had provided, so we ruled in favor of the Commission staff's proposed cost inputs in whole," he said.

"The most important thing for us is to get the loop priced exactly right to encourage both the competition and Sprint to continue investing in infrastructure," Soderberg said. "Instead of just buying off network elements from Sprint, the competitors should be encouraged to build their own networks. That's how closely priced the loop has to be."

But Sprint alleged the PUC erred in its price assessment by refusing to correct an error in its counting of network access lines, which resulted in lower loop costs than Sprint had calculated.

"Once the PUC reassesses the number of telephone lines we have here in Southern Nevada, they may find that the cost of building and maintaining the loops could even be higher than $13.89," Sprint's McCoy said.

But Bolle disagreed, alleging Sprint was trying to raise its loop price by understating the number of loops. Generally. the higher the loop count, the cheaper it is to lease the loop.

"One of Sprint's allegations is that the line count that was used in calculating loop costs was overstated and therefore the price of the loop was understated," he said.

Sprint also alleged the PUC failed to establish loop rates that are just and reasonable because it relied on outdated information from rural companies whose operations don't bear any relationship to those of Sprint in Nevada.

Sprint said the PUC rejected its estimates, which it said are based on recent actual work orders for construction activity in Las Vegas.

Sprint alleged the PUC's inputs failed to reflect "regional contractors' prices; actual construction techniques in Southern Nevada; the advantages gained by employing construction practices which are consistent with local ordinances; actual experience with purchases and installation of telephone plant in Southern Nevada; and realistic expectations for sharing of structures which support telephone facilities with other utilities."