Pac Bell May Hang Up on Caller ID : Telecommunications: Tough rules aimed at protecting privacy would hamper service, sources say.

Pacific Bell is expected to announce Wednesday that it will not offer the controversial Caller ID telephone service in California as previously planned because of the severe restrictions imposed by state regulators, company sources said.

Instead, the sources said, the state’s largest phone company will ask the California Public Utilities Commission to loosen the controls placed on the service when it was approved last month. Those restrictions are considered the toughest in the nation.

Caller ID, which allows customers to identify a caller’s phone number before they answer the phone, has sparked criticism from consumer groups across the country. These groups say the service invades the privacy of callers.

Pacific Bell, which serves 11 million customers, is the second company to balk at the state’s restrictions on Caller ID. GTE California, with 3 million customers, last month dropped its plans to offer the service. Contel, with 350,000 customers, said it is still studying whether to offer the service.

A PUC spokesman said late Monday that Pacific Bell has not filed a petition seeking a new hearing.

The Pacific Bell source said the company has not yet decided what to do if the PUC refuses to reconsider the issue or leaves the existing controls unchanged.

In approving the service, the PUC required that the phone companies offer consumers three different ways to prevent their phone number from being displayed on a special Caller ID device at no extra charge. Under “per call blocking,” customers could choose to block their number each time they placed a call by punching a special code; under “per line” blocking, all calls made on that line would not be displayed on Caller ID. Under a third option, customers blocking the entire line could selectively unblock it by pressing a special code.

The phone companies were especially upset by the commission’s ruling that, unless a subscriber asked otherwise, an unlisted phone number would automatically be given per-line blocking. In California, more than 40% of residential telephone numbers are unlisted, the highest rate in the country.

The phone companies argue that the restrictions could mean that 50% or more of the state’s phone subscribers would automatically be allowed to block their phone numbers from being identified. If such a large number of subscribers block their numbers, company officials have said the service’s value to remaining participants, who would be charged $6.50 to $7.50 per month for it, would be severely eroded.

“Under the current restrictions, the value of the product is completely shot down,” said the source at Pacific Bell. “With all the ways customers can block their numbers from appearing, we’d be lucky to sell any. Would you buy it if you knew that 50% to 70% of the numbers would be blocked?”

Consumer groups, which had cheered the PUC’s action last month, said they are ready to fight any attempt by Pacific Bell to weaken the controls. “We think the controls are good and anything less would be a blow to the privacy of Californians,” said a spokesman for Toward Utility Rate Normalization, a San Francisco consumer group.