The commission has adopted a settlement agreement that allows Sprint's local phone unit to spin-off into a stand-alone company, separate from its wireless and long-distance services, soon to be known as Embarq Corp. (Docket No. 051291; see "Documents" link below for more information.)

The UTC heard testimony March 6, 2006, on the proposal to approve, with conditions, the proposed restructuring and property transfer by Sprint Nextel/United Telephone. Existing Washington customers of Sprint Nextel will not experience any service changes or price increases when the local phone service separates and becomes Embarq. The name change should be complete by June.

The spin-off requires the approval of state regulators in 14 of 18 states where the company provides local phone service. Pennsylvania has not yet decided whether to approve the transaction.

The Public Counsel section of the Attorney General’s Office and the UTC regulatory staff submitted a joint proposal to the commission on March 2 recommending approval of the merger subject to several conditions.

Under the settlement, all Sprint local phone customers will receive a one-time credit on their telephone bill of about $6.73, most likely by June when the transaction is expected to be complete. Sprint customers currently pay about $9 to $16 a month for basic local telephone service. Beginning next year, the commission will require the phone company to pay $15 to residential or $25 to business customers for missed service repair or installation appointments.

“The automatic credits for missed installation and repair appointments will both provide the company with a reasonable financial incentive to provide good service and compensate customers when service is inadequate,” the settlement agreement stated.

Another settlement condition would allow a 90-day window for Washington customers who use Sprint for their long-distance carrier to choose another provider without incurring a $5 switching fee. Current Sprint long-distance customers may retain the company as their toll provider in the future.

The settlement includes a number of provisions to insulate Embarq’s regulated business from the potentially riskier activities of its nonregulated affiliates. These include dividend restrictions, debt limitations and reporting requirements.

A final settlement condition ensures that higher costs, such as branding or transition expenses due to the spin-off company, will not be passed on to Washington ratepayers.

Sprint proposed separating its wireline local telephone company into an independent, stand-alone operation. As part of that transaction, a new holding company will be created, and control of companies which serve local customers will be transferred to that holding company.

The company initially asked the commission to either decline to assert jurisdiction over the separation of United Telephone and Sprint Long Distance from Sprint to LTD Holding Company or, if it believes it is necessary to review the transaction, to approve the application.