Southwestern Bell to pay $10 million settlement

Mike Crissey

12/31/1999

The Fort Worth Star-Telegram, FINAL, Page 5, Copyright 1999

Most of money will go to state fund to help provide local Internet access

AUSTIN - Southwestern Bell Telephone Co. has agreed to pay $10 million to settle a class-action lawsuit with its customers in 400 Texas cities. Southwestern Bell , a unit of SBC Communications of San Antonio, provides local phone service to 75 percent of Texas, including Tarrant County. It plans to submit a long-distance application to the Federal Communications Committee in January and hopes to sell long-distance in Texas by April. In the July 1998 lawsuit from Brownsville, customers accuse Southwestern Bell of improperly passing on to customers franchise fees that cities charge the phone company to use telephone poles, wires and pipes. Because cities changed how they charged the phone company to use the lines, Southwestern Bell should have updated its fee structure and had the new fee approved by the Public Utility Commission, the lawsuit says. Southwestern Bell has said it broke no laws or regulations, and under the proposed settlement will not have to alter the way it collects fees. Customers will not directly receive any of the money - $3 million in cash and $7 million in service credits. Lawyers representing the customers can collect as much as $2 million and as much as $1.25 million can be deducted by Southwestern Bell to cover the cost of notifying customers of their rights under the settlement, said Jeffrey Tillotson, a Dallas attorney who represented the customers. Any money left over will go into the state's Telecommunications Infrastructure Fund, which is used to help get Internet access for local communities, libraries and school districts.

Tillotson said money was going into the fund because it would benefit Southwestern Bell customers more than the company giving all its customers "three cents on their phone bills."

The settlement centers on tax money that customers would have paid anyway, Tillotson said. "The goal of the lawsuit was to attack and address this issue about the municipal fees and to return to people or municipalities any unauthorized fees," Tillotson said. "We were faced with the problem that this isn't money that would have been in customers' pockets."

Southwestern Bell collects the taxes from customers and passes all the money to the municipalities. Customers pay the fees in monthly bills. The lawsuit accused Southwestern Bell of charging customers by using an outdated tariff, approved by the PUC in 1978. That tariff was based on a percentage of the phone company's gross receipts - generally, how much money Southwestern Bell collected from customers within the city limits for basic phone service. Southwestern Bell officials did not return phone calls by The Associated Press yesterday.