Regulators and telecommunication firms will meet Wednesday for a two-day hearing on alternatives in regulating the industry.

The hearing is an outgrowth of this year's legislative sessionwhere Mountain Bell failed to push through a bill that would have effectively deregulated telecommunications in Utah. The measure was vigorously opposed by Bell's competitors, consumer groups, businesses and state regulators, who forced the phone giant to withdraw its bill.Utah's Public Service Commission has since agreed to hold hearings on regulation of telecommunications companies and pass its recommendation onto lawmakers who may face another bill in the next session.

"This will be a very open hearing, like a roundtable discussion, and less formal than other proceedings," PSC chairman Ted Stewart said, noting the commission's recommendation should be ready by the end of July.

Parties involved in the hearings starting Wednesday include the state's Division of Public Utilities and Committee of Consumer Services, Mountain Bell, long distance providers and small independent phone companies.

In its position statement filed with the PSC, Mountain Bell, which recently changed its name to US WEST Communications, said the current "rate of return" regulation - where phone companies' profits are limited by regulators and any earnings in excess of that limit would initiate a rate change - is expensive to implement, arbitrary and anti-competitive.

US WEST proposes three alternatives: service-by-service regulation, incentive regulation and setting rates by a social contract with the state.

Utah's Legislature has already approved statutes that would deregulate telecommunications on a service-by-service basis as the PSC sees fit. But US WEST doesn't like that method, saying it's too time consuming and cumbersome to hold hearings on each service and doesn't allow the phone company to quickly respond to unregulated competitors in the market.

The next best method would be incentive regulation, which is being used in New York, US WEST said. It requires any profits above the amount set by regulators be split between the phone company and its customers, rather than the phone company giving up all its excess earnings to ratepayers. This would give US WEST an incentive to cut costs and increase innovation and service.

Best of all, according the US WEST, would be price regulation, where basic phone service would be frozen by contract with the state and all other areas of phone service would be deregulated.

US WEST attempted to legislate the price regulation proposal earlier this year, but met stiff opposition from competitors, customers and regulators who claimed US WEST has monopoly control over most areas of phone service besides basic local service and the service-by-service approach should be maintained.

And regulators say they are pleased the price regulation legislation with the rate freeze didn't pass because US WEST has exceeded its authorized rate-of-return and rates should be coming down within the next year.