Pac Tel Will Have to Pay for Spinoff, Sources Say : Telecommunications: The phone company, which wants to separate its wireless operation, is told to attempt a settlement.

State regulators will require Pacific Telesis to compensate California telephone customers in exchange for approval to spin off its wireless phone operations into a separate company, according to sources at the state Public Utilities Commission.

The only question now is: How much?

The PUC ordered Pacific Telesis and consumer representatives into settlement talks that began Monday in hopes they can resolve that issue before the matter is considered by the PUC on Thursday.

Consumer groups have proposed assessing Pac Tel up to $1 billion because telephone ratepayers helped pay for development of the wireless operations. Publicly, Pac Tel has balked at making any payment, arguing that its cellular operations are entirely separate from its Pacific Bell telephone monopoly.

However, commission sources say four of the PUC’s five members now believe that Pac Tel should make some payment, although there is no consensus on the appropriate amount. Only Commissioner Norman Shumway was said to oppose requiring any ratepayer compensation.

The latest talks mark the second time Pac Tel and consumer group representatives have tried to reach agreement on the compensation issue. During the first round of talks, which fell apart four months ago, Pac Tel reportedly offered to pay ratepayers $100 million over 20 years, while consumer representatives demanded $500 million over the same period. When the talks ended, both sides reverted to their original bargaining stance.

On Monday, hoping to end nearly 11 months of wrangling over the spinoff proposal, Commissioners Daniel Fessler and Gregory Conlon called on the two sides to resolve the compensation impasse.

Conlon called on both sides to understand “the realism and lack of realism” in the $1 billion separating their positions. He said failure to reach an accord quickly could jeopardize the success of the spinoff.

Pac Tel wants to formally divide its wireless and monopoly telephone operations to give each side greater opportunity to pursue its businesses.

For the wireless operation, that means greater freedom to expand its international cellular operations. Wall Street analysts say the new wireless company is an obvious takeover target for a larger telecommunications company, such as MCI Communications.

For the remaining traditional phone company, the split means a chance to bid next year for federal licenses to offer the next generation of go-anywhere, wireless phone service, now known as “personal communication services.” If successful, Pacific Bell could end up competing against its former wireless sibling in some California markets.