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From: tad@ssc.UUCP (Tad Cook)
Newsgroups: comp.dcom.telecom
Subject: Re: The Big PUC Give-Away
Message-ID: <2857@accuvax.nwu.edu>
Date: 12 Jan 90 06:35:05 GMT
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X-Telecom-Digest: Volume 10, Issue 25, message 7 of 10


Higdon mentioned something about what would happen if an unregulated
subsidiary of a regulated telco bought equipment, and then sold it to
the regulated telco at an inflated price.

The Wall St. Journal had an excellent article on this on Tuesday,
January 11 right on the front page.  It looks like Nynex was doing
just that...forcing the regulated telco to buy from their unregulated
purchasing arm...at inflated prices!  This came out in an FCC audit,
and the article indicated that other telcos have been doing the same
thing.

So the rate of return on the telco to the holding company is
guaranteed, and any expenses are covered by the ratepayers.  The
unregulated purchasing arm can sell to the telco at high prices, give
the profits to the holding company, and the regulated telco (the
ratepayers) foot the bill!

Pretty slick!  Or as Oliver North would say, "A neat idea!"


tad@ssc.UUCP