Telephone Rates

It is an uncontestable point that the new way of charging consumers for telephone service should take account of Cable & Wireless' productivity. The Fair Trading Commission recognises this.
So why has the FTC neglected to do so in the sensitive area of residential telephone service in both the last ruling as well as the new ruling?
The productivity factor is used by the FTC for other services and yet there is no explanation why it has been excluded for residential services which affect the lowest income consumers.
Consumer advocates made a lot of noise about productivity when our views were invited prior to the new decision on rates. We complained that the original 7 per cent price control in the first decision was not transparent, had not been explained and was unjustified. In short, a nonsense which only served to shackle ordinary citizens with unjustifiably high rates.
The experts tell us that when a regulator such as the FTC is preparing rates under a Price Cap model "The proper choice of an X-factor (productivity factor) is critical for the long-term viability of any price cap plan."
So, for example, the use of a productivity consideration can result in price "reductions".
What usually happens is that if a company can increase its productivity beyond inflation then the consumer may benefit from lower rates.
So my concern is if the FTC can use prductivity as a factor in other services under the new Price Cap why can't it do so for residential service? Certainly every citizen would be pleased in these hard times to know that at least their basic monthly telephone bill is lower than previous years. If we read the new decision carefully the FTC agrees that the company's productivity gains were higher than anticipated.
Would this not suggest that the compounded 22.5 per cent increase in rates over the past three years was a bad decision?
The FTC has never explained why it chose seven per cent and after the initial period of a freeze in the new rates Cable & Wireles can charge a maximum of 4.5 per cent annually. Again, no explanation for this figure although we believe it is related to projected inflation rates.
The overall decision suggests that a lot of work has been done by the FTC and its consultants.
What is in question is whether in the case of residential rates the consumers are getting a fair deal.
What do you think?
Hallam Hope