Residential phone customers have been abandoning CenturyLink at a faster clip than Mariners fans have forsaken Safeco Field. And that’s saying something.
Once the foundation of telecommunications, conventional “wire line” telephones have gone the way of the buggy whip for many. Their functional equivalents, cells, cable-company telephony and so-called VoIP systems, are typically available for significantly less money as part of a bundle, like Comcast’s so-called “triple play” combo of Internet, TV and phone.
In Washington State, between December 2001 and December 2012, CenturyLink’s “retail access lines” — telecom jargon for old-fashioned, copper-wire residential phones — declined 60 percent, from nearly 2.7 million to just over 1 million. (Mariner attendance over the same period dipped about 40 percent).
So the last thing you might have expected to see was CenturyLink — formerly Qwest and before that US West — supporting legislation to increase the cost of phone service by a few bucks per month, possibly enough to send even more residential customers packing. Yet that’s just what CenturyLink did in Olympia this past spring when it joined with other telecom providers, including wireless carriers, to back a tax reform package meant to standardize those enigmatic taxes and fees tacked onto phone bills.
Such “parity” hits CenturyLink’s residential customers hardest, because the single biggest change was to remove an exemption that spared them from paying sales tax on basic service.
The company’s support is consistent, however, with its position before the Washington Utilities and Transportation Commission (UTC). CenturyLink is petitioning to be treated like one of the gang — just another company in a crowded and highly competitive market — and not the quasi-monopolist it was until a broad array of alternative technologies killed the once true “captive customer base” scenario.
CenturyLink’s wish will likely be granted. The UTC is expected to approve lighter regulation as soon as early next year, according to Brian Thomas, a senior policy advisor with the commission. The UTC has already eased off some regulatory controls, primarily in connection with CenturyLink’s business customers.
“We believe in tax parity; we believe in regulatory parity,” says longtime lobbyist Tom Walker, who has represented CenturyLink and its predecessor companies since 1980. “We’re all competing for the same customer, providing the same types of services using different technologies. But we’re all regulated and taxed differently. We have to get to a point where regulation and taxes aren’t the deciding factors on who are the winners and losers in the market.”
CenturyLink customers are paying more for landlines. Credit: Dan Strange/Flickr
Another reality that helps explain CenturyLink’s move in support of what amounts to a rate hike for its customers is that the residential phone market isn’t the golden goose it used to be for conventional telephone companies. Nor does the residential-phone crowd seem to be the sector the company is targeting, judging by its acquisitions and mainstream advertising. Two years ago, for example, CenturyLink paid $2.5 billion to acquire Savvis, a company specializing in cloud computing and data management for businesses.
What really propelled the legislative reform package that led to tax parity was less about CenturyLink, though, than a lawsuit brought by Sprint that led to a bombshell court ruling.
State Rep. Reuven Carlyle, the Seattle Democrat who co-sponsored the legislation, explains: In 1983, a state law took effect that gave a tax break to residential phone customers. The chief beneficiary in Washington was Century Link's predecessor US West, the state's biggest residential phone company, and one of the new Baby Bell companies formed after the Justice Department filed an anti-trust lawsuit against Ma Bell (AT&T).
“When AT&T was divested, there was no cable, no satellite, no wireless,” recalls Carlyle, an executive with McCaw Cellular and AT&T Wireless before he won election to the House in 2008. “The language written in the statute was incredibly generic.” Referring broadly to “home phone lines,” it carved out a sales-tax exemption for residential customers.
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