General Telephone Asks for $114-Million Cut in Revenue

In what may be a first for a telephone company, General Telephone of California asked the state Public Utilities Commission on Monday to cut its annual revenue by $114 million, or 4.4%, effective in 1988.

Tom Leweck, a General Telephone spokesman, said about one-third of the company’s 2.3 million residential customers--particularly those who are heavy telephone users--would pay less under the company’s request. That would result partly from the company’s proposed elimination of its 11.75% surcharge.

At the same time, however, the plan would increase customers’ basic monthly charge to $13.65 a month. Customers now pay a basic monthly charge of $9.75, before the surcharge is taken into account.

General Telephone also proposes increasing its basic 20-cent pay-phone charge to a quarter.

The Thousand Oaks-based company, the state’s second-largest local phone company after Pacific Bell, estimates that its 1986 revenues will total $2.6 billion, Leweck said.

Despite the proposed 4.4% cut, General Telephone’s request was derided as “absolutely outrageous” by Sylvia Siegel, executive director of the San Francisco-based consumer coalition Toward Utility Rate Normalization, or TURN. Siegel also said the $114-million reduction represents “only about one-third of what should come out.”

Spokesmen for both General Telephone and Pacific Bell could recall no precedent for the proposed revenue reduction. PUC spokeswoman Carole Kretzer said it might be a first in the nation.

“If inflation stays down and interest rates stay down, the companies’ cost of debt is bound to go down,” she said.

General Telephone said improved productivity from a more efficient and less labor-intensive operation also cut its expenses, clearing the way for its revenue-cutting request.

The company also asked the PUC to reduce its authorized rate of return, or profit, on its investment to 11.9% from the present 12.64%.

The company now brings in $186 million in revenue from the 11.75% surcharge that would be eliminated, prompting it to request higher charges for monthly service and pay telephone calls.

Another $52 million now paid to General Telephone by long-distance carriers to use its local network would also be shifted to local customers’ service charges. The shift in so-called access charges is part of a seven-year program ordered by the PUC several years ago. It ultimately will add $2.50 to the local phone bill, in addition to the $2 already levied by the Federal Communications Commission.

“Some customers will see a decline in their total phone bill as long-distance companies continue to lower their rates,” said Jim Parrish, General Telephone’s vice president of public affairs. These have declined by 30% since the breakup of the old Bell System in 1984, according to the Federal Communications Commission. “In the past, revenue from long-distance service has subsidized local rates and kept them priced artificially low.”

The winners among General Telephone customers, according to Leweck, would be residential customers whose monthly local toll calling runs up charges exceeding $25 a month. That represents about one-third of the company’s residential customers. Leweck said the average residential bill last year was about $50. But that figure was inflated by long-distance charges that General Telephone collected under contract for American Telephone & Telegraph, he said.

Customers with lower monthly charges might benefit from another proposal, an optional so-called measured service, Leweck said. Measured service would cost $8 a month, plus four cents for the first minute of a call and one cent for each additional minute. The maximum monthly charge for measured service would be $14.85.

General Telephone proposed that this measured service be phased in over three years, starting in May, 1988. When the service begins, the proposed $13.85 “flat rate” offering unlimited local calling would rise $1 to $14.85.

The company now offers measured local service in many of its metropolitan service areas at a cost of $5.25 a month, which includes $3 worth of local calling. After that, additional calls are billed at seven cents for every five minutes. Only about 5% of General Telephone customers now subscribe to this service, however. Conversion entails a $30 fee--a charge that would be dropped in offering the new measured service.

Low-income customers also would continue to be eligible for “life-line” service that is available at one-half the basic rate, the company said.