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Bell's $30 Million Education Offer "Peanuts," Senator Urges Rate Review to Chart More Appropriate Figure

Southwestern Bell's latest offer to give $30 million to education is "peanuts," according to a Senate budget leader who has been pushing for a much more substantial school investment from the telephone company.

"If they multiply their current number by 10, they might be in the ballpark, but quite frankly, I think the $30 million figure is a joke. It's peanuts when you consider the hundreds of millions of dollars Bell stands to make off this deal. I really don't consider it a serious offer and I don't think the people of Oklahoma will either, especially in light of what happened the last time Bell pledged to give money to education," said Senator Cal Hobson, chairman of the Senate Appropriations Subcommittee on Education.

Bell announced yesterday that it would contribute $30 million to a school technology fund in exchange for a new form of state regulation that is expected to be especially lucrative for the telephone company. The proposal has a familiar ring to it, according to Senator Hobson, who noted that Bell also promised to give education $30 million as part of a 1995 rate settlement, but only delivered $2 million. The telephone company ended up keeping $228 million of the total $640 million settlement. "That fact makes the latest offer especially hollow. Bell is basically promising to give education the same money it was supposed to give the schools the last time. That won't wash," said Senator Hobson.

Senator Hobson noted that the $30 million proposal is only a fraction of the amount Bell officials were offering to the state during the final days of the 1999 legislative session. At one point, for example, the telephone company indicated it would contribute up to $300 million to help fund a higher education bond issue.

"It doesn't make sense to accept $30 million just a few months after Bell was offering $300 million. I think they're throwing out the lowest possible number and hoping that the state will jump at it. It would be a great disservice to our schools if we did," said Senator Hobson.

One of the key components of the regulatory agreement Bell is seeking would allow it to freeze rates for the next five years, ensuring profits that State Corporation Commission figures indicate are well in excess of the company's mandated rate of return. The commission numbers show that Bell has made $91 million in excess earnings each year since 1997. The profits would continue in perpetuity under the proposed regulatory agreement, with earnings possibly rising each year as the costs of delivering telecommunications services continued to decline.

"We're about to give a state-sanctioned monopoly a license to make huge profits well into the next century, without any substantial competition or an annual review by the state. Education should get its fair share of the future earnings Bell will make in Oklahoma. Thirty-million dollars is nothing near a fair share, given the huge numbers involved," said Senator Hobson.

The State Senate has hired a legal consultant to help it monitor the ongoing Bell negotiations. Rick Chamberlin, a former assistant Attorney General who negotiated Bell's last rate settlement, is collecting information to determine if the telephone company's current rates are fair to consumers.

Bell hasn't undergone a rate review in almost a decade, but Senator Hobson thinks it may be time for one.

"We think Bell can give education $300 million; they say they can only afford $30 million. Let's open up the books and see who's right. I think if we conduct a thorough rate review, we may even find that $300 million is too low," said Senator Hobson.

The Corporation Commission is in the process of finalizing an alternative regulation agreement with Bell. That proposal will ultimately go before the Legislature for its approval and the consideration of any related legislation.

Contact info
Senate Communications Division - (405) 521-5605