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Nynex Proposes Rate Decline for Competitive Protection

September 27, 1994

ALBANY, N.Y. (AP) _ Nynex Corp. submitted a plan to state regulators today to cut basic rates in New York while freezing other higher rates for seven years.

Long distance companies criticized the plan, saying Nynex is using it to hold off potential competitors.

Wall Street immediately recognized the plan’s profit potential and sent Nynex stock up $1.12 1/2 to $37.12 1/2 on the New York Stock Exchange.

The plan would affect 7.5 million business and residence customers across New York and will now be considered by the state Public Service Commission. It already has the support of the commission’s staff and the governments of New York City and Buffalo, Nynex said.

The proposal marks the second time this month that one of the nation’s big local phone companies has angered long distance companies over a long-term phone rates.

In Missouri, long distance firms have protested a four-year rate moratorium Southwestern Bell Corp. won from regulators after agreeing to a one-time cut.

The long distance companies fear that freezing rates for a long time while costs are declining will give local companies more profit to improve their position for direct competition.

Nynex proposed a rate cut taking effect Jan. 1 that would reduce the average monthly residence phone bill in New York by 56 cents to $33.

While freezing basic rates, Nynex said its proposal would free it ″to price, package and introduce services more flexibly.″

In return for such freedom, the company said it would also:

-Eliminate a monthly 50 cent touch-tone charge for consumers beginning in 1995 and a monthly $1.30 touch tone charge for businesses in 1997;

-Give rebates to customers for poor service;

-Allow customers to choose other companies for local calls;

-Expand calling areas in New York City that would, for example, cut the cost of a call from Manhattan to Brooklyn.

MCI, AT&T and other long distance carriers said they would fight the proposal.

″Nynex is attempting to construct anti-competitive roadblocks right here in New York state into the next century,″ said Donna Sorgi, a lobbyist for MCI.

Local and long distance companies, while frequently boasting about the future efficiency and savings competition will bring, have vastly different ideas about when they should directly fight for customers.

Those differences surfaced throughout the summer in Washington as Congress considered sweeping reform to federal telecommunications law. The reform effort died last week when Sen. Ernest Hollings, a chief sponsor, said the bill wouldn’t get through because of opposition by local phone companies.

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