Q&A; : How Pacific Telesis Split Affects Consumers, Rates

Q. Why is Pacific Telesis breaking up?

A. Because telecommunications technology is advancing at a rapid pace.

The idea behind traditional regulated phone service was that it made economic sense to award a local monopoly to limit the great expense involved in setting up central switching stations and laying telephone wires. Regulation would ensure that good service was maintained at the lowest feasible price.

But in recent years cellular phones, which have no wires, have been introduced. Technology is marching on, allowing computers and phones in one handset--called personal communications systems--to be operated anywhere using radio waves.

All those developments set up conflict in a regulated company, as to whether profits would be used to reduce phone rates, or to develop newer technologies. Even governmental procedure has been confused--the unified Pacific Telesis would have been ineligible for a personal communications radio license from the Federal Communications Commission next year.

Also, competition is coming to local phone service just as it came to American Telephone & Telegraph Co. before the breakup in 1984. Competitors, offering cheaper wireless service to business, threatened to take away good Telesis customers--and leave it as the telephonic equivalent of the Postal Service, the route of last resort.

So the company decided to split. Pacific Telesis will retain traditional phone operations in Pacific Bell and Nevada Bell plus the Pacific Bell Directory, or Yellow Pages. The other company will own cellular operations here and abroad, and have the opportunity to pursue new businesses in cable television, interactive video and other technologies.

Q. So will local phone bills now go up?

A. No, local phone bills almost certainly will not go up in the immediate future. Phone rates of Pacific Telesis, the local phone company, will remain regulated. Also, the company’s sizable future profits--estimated Friday at $1 billion on $9 billion of annual revenue by Phil Quigley, who will be Telesis’ chairman after the split--argue against a need to ask for rate increases.

However, as competition in California from local providers and from AT & T, IBM and other giants heats up, Telesis profits could come under pressure. Its response might be to seek rate increases.