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State will still regulate local phone services

SALEM ­ This session of the Oregon Legislature will not deregulatelocal telephone service or overhaul the franchise fees that cities chargeto utilities.

Chairman Eldon Johnson, R-Central Point, said his House Commerce Committeewas unable to resolve differences among the parties or impose its own solutionson them. Speaker Lynn Lundquist, R-Powell Butte, closed the committee, asis routine toward the end of a session, thus preventing it from consideringany more legislation.

We could not find anybody who would agree to anything, Johnsonsaid. When we would try to do one thing, someone would be adverselyaffected.

Johnson drew criticism in March when he agreed to introduce a bill atthe request of US West Communications, which has about 90 percent of theOregon local-service market, and other local-service providers. Consumeradvocates said, and Johnson acknowledged, that House Bill 3021 would haveallowed those providers to maintain their monopolies even as local serviceis deregulated in Oregon.

Johnson said he introduced the bill only as a starting point for discussionand that he did not agree with everything in it.

Most of the attention was to what the bill's critics said was an attemptby US West Communications to bypass the Public Utility Commission, whicheventually ordered a refund of $97 million in excess revenue instead ofan increase in residential rates that the utility requested. US West hasfiled a court appeal to the May 19 refund order.

Because Congress last year passed the federal Telecommunications Act,which eventually will open up local service to competition, the Oregon Legislaturewas considering state deregulation this session. Long-distance service wasderegulated following federal court rulings that led to the breakup of theAT&T monopoly in 1984.

But, except for some businesses in downtown Portland, active competitionfor local service in Oregon has not yet materialized. Johnson said thatsituation will change when wireless services become widespread.

The competition is not really there yet, but it will be by nextsession, Johnson said. Then the Legislature will need to dealwith franchise fees. What I hope will happen is that they will be repealed.I think if consumers know how much they are paying, they would vote againstthem in an instant.

Anticipating deregulation of both electric and local telephone service,Johnson's committee considered another bill that would have replaced cityfranchise fees on all utilities, with a state tax on utility customers forthe utilities' use of public rights of way.

But House Bill 2060 also drew criticism from utilities, which draftedit but objected to the 5 percent rate that Johnson proposed, and citiesthat feared a loss of local control over utility activity in rights of way,such as streets.

Utilities negotiate franchise fees with cities for use of public rightsof way for utility lines. The typical rate is 5 percent, though the rangeof rates depends on the type of utility. The utilities pay cities but generallypass on the costs to consumers and list them on utility bills.

Under the proposed change, the state would have collected the tax fromutility customers and then distributed the proceeds to cities and counties.Counties cannot impose most franchise fees now.