Pac Bell, GTE Plan Major Changes in Phone Rates
In their most far-reaching rate restructuring proposals in a decade, Pacific Bell and GTE on Monday will request state approval for fee changes that some consumer advocates estimate could boost consumers’ basic monthly telephone service fees at least 50% over the next few years.
The companies declined to reveal the extent of the proposed rate changes, to be requested from the California Public Utilities Commission in a process expected to involve months of hearings and political wrangling.
But some consumer activists have estimated that the basic monthly fee--now at $8.35 for Pacific Bell customers and $9.75 for GTE customers--could rise to more than $12 over the next two to five years.
However, at the same time, rates for “local long-distance” service, or calls traveling more than 16 miles within a local calling area, would drop significantly. That would come as the PUC allows long-distance carriers such as American Telephone & Telegraph, MCI and others to begin serving the local long-distance market, now the exclusive territory of Pacific Bell and GTE.
Overall, state regulatory officials say the new rates should not result in any additional revenue for the phone companies when they become effective, probably in early 1993. That’s because the cumulative effects of the changes will counterbalance each other. However, there would be some significant changes in individual bills. The big winners would be customers, such as big businesses, who make many toll calls. The biggest losers would be customers, such as homeowners and small businesses, who make few toll calls.
The rate proposals scheduled for unveiling Monday are all part of the ongoing effort by regulators and telecommunications industry officials to inject new competition into the local telephone market by allowing new players to enter. Regulators also want to force telephone customers to pay for services they actually use, based on the costs of providing them.
The result of this effort, which began nearly a decade ago, will be a sharp reduction in the subsidy of “basic service” now built into the rates Pacific Bell and GTE charge for local long-distance calls.
For example, Pacific Bell estimates that while it charges $8.35 per month for basic phone service--the lowest in the nation--the actual cost of the service is about $25. The difference is made up from the rates Pacific Bell charges for its long-distance services--a situation that, in effect, requires businesses to subsidize the telephone service of residential customers.
However, the PUC has announced its intention to open Pacific Bell’s and GTE’s local long-distance monopoly service territories to competition from AT&T; and other carriers whose charges are significantly below those offered by the local phone companies.
For example, AT&T;’s fees for some local long-distance services are about 35% to 40% lower than those charged by Pacific Bell, and Pacific Bell officials said Tuesday that they will be forced to lower their rates to compete under the new terms expected from the PUC.
While not revealing the contents of its upcoming proposal, a Pacific Bell executive said Tuesday that the plan would seek to align the prices of both basic service and long-distance services more closely to their actual costs.
“Rates for local long-distance are going to have to come down, and some of the subsidy for residential users will be eliminated,” said Bruce Jamison, Pacific Bell’s assistant vice president for state regulatory affairs. “Basic service fees are likely to increase.”
Consumer activist groups, such as San Francisco-based Toward Utility Rate Normalization (TURN) and San Diego-based Utility Consumers’ Action Network (UCAN), have been gearing up for months to fight these rate proposals. A PUC official on Tuesday confirmed consumer groups’ estimates of the expected rate hikes.
“The phone companies will ask for an initial increase, then a couple of subsequent increases,” said the official. “The commission will be comfortable with phasing. The increases can be made palatable over time.”
Public hearings on the rate increase proposals are scheduled to be held throughout the state in late October and early November. In Southern California, hearings will be held in Pasadena and Santa Monica on Oct. 28; in Anaheim and Lakewood on Oct. 29; in San Diego on Oct. 30, and in San Bernardino and Victorville on Oct. 31.
Rising Monthly Telephone Charges
Pacific Bell’s charges for basic monthly phone service:
Year Rate 1971 $4.65 1975 $5.70 1979 $6.00 1982 $7.00 1984 $8.25 1988 $8.35
Source: Pacific Bell
