CenturyLink (NYSE: CTL) continues to receive compensation for providing low-cost phone service in hard-to-reach areas of Colorado, but the state would like to change that.
Under the High Cost Support Mechanism, a plan which was developed in 1990 when the company was known as US West and later Qwest, the state, using funds collected from ratepayers, reimburses the service provider over $50 million a year to cover service costs to about 417,000 customers situated in remote areas of cities such as Aurora, Parker and Fort Collins and the rates they pay. However, the population of many of these towns and cities have continued to increase in density in recent years.
According to the Colorado Office of Consumer Counsel, the High Cost Support Mechanism is refunding CenturyLink and rural carriers for supplying multiple lines that serve one home.
The consumer office would like to update the program and is investigating how much it actually does cost to serve the areas covered under the subsidy.
CenturyLink, which acquired Qwest in April, argues that network maintenance and upgrades are more expensive than the $17 rate regulators let it charge for traditional POTS.
"We support regulatory reform in Colorado, but we also would note there will continue to be areas where high-cost support is necessary; otherwise we would charge them ungodly amounts," said Jim Campbell, regional vice president for CenturyLink in a Denver Post article.
A lot has changed since the program was developed in 1990, a time when cell phones were a novel luxury and VoIP was a white board concept. Regulators believe that the rules should represent the 2010 reality that there are 4.7 million wireless subscribers and 500,000 VoIP customers in Colorado.
"The significant line losses experienced by traditional wireline providers combined with the significant number of customers served by nontraditional providers . . . demonstrate that consumers can obtain a variety of telecommunications and broadband service at reasonable and comparable rates," the consumer office wrote in an August filing that pushed for a review of the program.
For more:
- The Denver Post has this article
Related articles:
CenturyLink, Savvis merger complete
CenturyLink makes good on Qwest acquisition provision with $10 broadband service
CenturyLink goes from local to global player with proposed Savvis acquisition
CenturyLink's Savvis to power Virgin Media's cloud service drive
CenturyLink's Qwest will sell $950M in notes