Key Phone Ruling Will Boost Bills
In a key decision that will result in higher telephone rates for the state’s residential customers over the next several years, the California Public Utilities Commission ruled Wednesday that Pacific Bell and General Telephone can shift some of the costs paid by long-distance telephone carriers to the bills of residential customers.
The ruling is a landmark decision, a PUC spokesman said, because this is the first time that California has fallen into step with the federal policy of shifting some of the costs of maintaining the telephone networks to smaller users from larger users.
California has required such long-distance carriers as AT&T;, GTE Sprint and MCI to bear the burden of “access charges,” the fees that local companies charge for access to their networks. To bear the costs of access charges for interstate calls, the Federal Communications Commission requires that all telephone customers pay; $1 was added to each residential phone bill in June to cover some of those costs.
The Public Utilities Commission told Pacific Bell on Wednesday that it could reduce rates paid by long-distance carriers for access to Pacific Bell’s local network by $140 million, or about 11% of the estimated $1.283 billion in access charges that the carriers will pay Pacific Bell in 1985.
The commission authorized Pacific Bell to make up for that revenue loss by adding a 3.15% monthly surcharge to residential customer bills. That will mean an increase of about 25 cents to the $8.25 basic monthly rate charged the company’s 7.2 million residential customers. Overall, the average monthly bill of $22 will increase by about 70 cents because of an additional surcharge on toll calls handled by Pacific Bell within its service areas, a Pacific Bell spokesman said.
The commission will allow General Telephone to lower access charges to long-distance carriers by $7.5 million and to apply a 0.55% surcharge, or about 5 cents, to the monthly bills of each of the company’s 2.5 million customers.
The increases should appear on bills by August, a PUC spokesman said. The commission has ordered long-distance carriers to pass along the savings that result from Wednesday’s ruling to telephone customers. That should offset some of the increase, depending on how many long-distance telephone calls a customer makes.
The commission also ruled that certain costs to long-distance carriers should be reduced from 1986 to 1993, a decision that will result in future surcharges to customers.
The ruling had its origin in a request by Pacific Bell in late 1983 to levy a $1 surcharge on residential customers and a $3 surcharge on business customers to cover its costs of providing telephone network access to callers within the state. The commission rejected that request but authorized Pacific Bell and General Telephone to recover some access costs by establishing certain charges for long-distance carriers.
After trying out the system for several months, Pacific Bell requested last August a $232-million reduction in access charges and a 13.77% customer surcharge, which would be about $4 per bill. Pacific Bell said it needed to reduce access charges to keep large telephone users from bypassing their system by building their own networks.
The commission denied that request as “drastic” but said it recognizes “the seriousness of the bypass issue as a long-term problem.”
The bypass issue has emerged as a major public policy question since American Telephone & Telegraph was forced to spin off its local phone companies to settle a federal antitrust lawsuit.
Fixed Costs to Drop
To address the problem, the commission adopted a plan that will reduce certain fixed costs assessed to long-distance companies by about 50% over seven years beginning Jan. 1, 1986. That means, assuming zero inflation and no other rate changes, that Pacific Bell’s basic rate will increase by $3.25 by the seventh year and General Telephone’s by $2.50 by the end of the period, a commission spokesman said.
“The course we take is a moderate one,” Commissioner Victor Calvo said at the hearing. “I also believe that the proposed order . . . makes clear our intent to re-examine the local rate increases . . . should events demonstrate that residential and small commercial ratepayers are bearing a greater burden than necessary.”
Commission President Donald Vial called the decision “the bitter fruit of national policy.”
“I expect that a lot of low- and moderate-income families and small-business people are going to gag a little on this bitter fruit,” he said at the hearing.