PUC Revamps Rate Rules on Cellular Units : Pricing: The commission disappoints consumer groups by not demanding cuts. But a cap on pay-phone charges wins praise.
The California Public Utilities Commission on Wednesday adopted new pricing guidelines for the state’s expanding cellular telephone service network but failed to satisfy consumer advocates seeking immediate and mandatory rate cuts.
The PUC also adopted new rules designed to standardize pay phone rates and services in most of California.
The commission’s new policies on cellular phones allow service providers to drop their prices up to 10% at any time without waiting for regulatory approval. Providers must still win regulatory authorization for rate increases.
However, the new guidelines steer clear of requiring any rate cuts and leave the matter of pricing schedules--which in Los Angeles have remained unchanged since 1984--entirely up to the two service providers in each community.
PUC President Mitchell Wilk said the new policy can “indirectly” lead to rate reductions and noted that the commission will look to the providers to initiate price cuts.
However, others doubted that providers would voluntarily meet the challenge.
“The current rates are outrageous, and there is no reason to see why these rates should drop now just because we have made it easier for the companies,” said Fred Harris, an aide to PUC Commissioner Fred Duda, the lone dissenter in Wednesday’s 4-1 vote.
Cellular market analysts have repeatedly noted that service charges, which hit 45 cents per minute during peak business hours in Los Angeles, constitute the largest barrier to even faster consumer acceptance of cellular service. Since introduction of the service nearly seven years ago, prices of the least expensive cellular equipment have dropped by about 75%, to nearly $500. But service fees have remained relatively constant.
Cellular operators have argued that they should be allowed to recover, through their rates, the cost of the huge investments required to install, maintain, upgrade and expand their cellular networks.
However, consumer groups argue that cellular service has become so popular in California--the home of 20% of the nation’s total users--that cellular providers have been able to generate huge profits without facing much competition or government regulation.
According to figures presented to the PUC, profit rates for cellular providers range from two to four times higher than those for traditional telephone service companies. This lack of competition, consumer advocates say, stems from federal rules that limit to two the number of cellular service providers in any market.
Still, customers have flocked to install the devices in their cars--especially in Los Angeles, home to more than 250,000 subscribers and the nation’s largest cellular market.
Consumer groups, which had lobbied the PUC to adopt pricing and other policies that would spur competition, expressed disappointment at the PUC’s vote.
“Consumers should be outraged,” said state Assemblywoman Gwen Moore (D-Los Angeles), chairwoman of the Assembly Committee on Utilities and Commerce. “This ruling doesn’t do anything to ensure that cellular service will be affordable to all the people.”
Audrie Krause, executive director of Toward Utility Rate Normalization, a consumer group, criticized the PUC for failing to exercise greater control over mobile telephone operations.
“The PUC doesn’t want to regulate the cellular industry any more,” Krause complained. “But this type of utility is becoming part of the essential infrastructure of the California economy.”
In other action Wednesday, the commission approved minimum operating standards for pay telephones throughout most of California and imposed a 20-cent maximum fee for local pay phone calls.
