GCI seeking share of MTA local phone market

October 25, 2005

DAWN DE BUSK/Frontiersman reporter

PALMER - Matanuska Telephone Association will go before the Regulatory Commission of Alaska on Monday in an effort to stop GCI from using MTA's infrastructure to provide local phone service to Valley residents, according to Don Reed, MTA's director of regulatory affairs.

Those hearings should last a week, he said during a phone interview on Friday.

The federal Telecommunications Act says that rural phone companies are protected from competition from other businesses that could offer local phone service. However, if a rural telephone company goes into the cable television business, then they lose that exemption, according to GCI spokesman David Morris.

&#8220MTA began offering video services to its customers a few years ago. When they did, GCI filed a request with RCA for interconnecting to MTA's network,” Morris said.

Basically, that means that because MTA entered the arena of providing cable TV packages to its customers, GCI can compete with the Valley telephone co-op and offer local phone services by hooking up to &#8220the loop” that goes into residents' homes, according to Reed.

That loop, also known as an unbundled network element, or UNE, is owned by MTA, Reed said.

The Telecommunications Act allows GCI to use MTA's equipment and pay a discounted rental fee, he said.

MTA has asked RCA to consider a three-year suspension of interconnection, which would prohibit GCI from leasing MTA's UNEs but not stop GCI from competing in local-phone-service business, Reed explained.

&#8220It's like having an apartment and renting it to someone. You can't live in it because they do. It's like building a $200,000 home and having the government set a rental rate that would only allow you to get back $100,000. You couldn't stay in business that way,” Reed said.

When MTA goes before RCA on Monday, the co-op will argue severe financial burden, he said.

&#8220If we don't get the suspension, our financial folks and board of directors will have to re-evaluate our future. The impact that we forecast now is that this will not allow us to survive,” Reed said.

Morris said GCI's past experiences with rural phone companies illustrates that competition allows local-based phone businesses to thrive.

&#8220ACS lost its rural exemption in Fairbanks and Juneau, and that company is doing better than ever financially. The merits of the case are with us. MTA won't be harmed. Sure, we'd all like to be a monopoly, and it'd be easier, but competition makes everyone better,” Morris said.

&#8220What we're hearing is the Valley residents want options, choices to use a competitive provider. The quality will improve and the prices will go down,” Morris said.

Reed said that GCI is already allowed to compete with MTA in the local phone market, and that's fine with him as long as they build their own UNEs.

GCI's Wasilla-based operator center employs about 100 people, while another 150 working for the company live in the Valley, according to Morris. If RCA gives GCI the go-ahead, the company would probably invest $60 million in capital to expand, he said.

MTA provides 300 residents with jobs, Reed said.

&#8220We take all the revenue and plow it back into this area. With us, everything stays in the Valley,” he said.

Following the weeklong RCA proceedings, the commission's decision will determine if the co-op remains the only local-phone service carrier.

&#8220It's ironic that they think that economic hardship is going to unduly hurt them and yet they are spending millions to keep the competition out,” Morris said.

Reed said MTA understands GCI's motivation for wanting to expand.

&#8220GCI's not evil, they're just doing what any capitalist would do to boost their stock prices,” he said. &#8220We respect GCI as a competitor.”

Contact Dawn De Busk at 352-2252, or dawn.debusk@ frontiersman.com.