Q & A : The Bottom Line : Basic Rates Will Rise, Local Toll Prices Will Drop

Sharply higher fees for basic telephone service. Big drops in the cost of local toll calls.

Those are two of the chief results for Californians of a long-awaited decision Thursday by the state Public Utilities Commission to open to competition the market for local toll calls, traditionally the province of monopolies such as Pacific Bell and General Telephone Co. of California. Here is a look at how consumers will be affected:

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Q: What does the ruling mean for the state’s 21 million telephone users?

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A: Beginning Jan. 1, Californians will be able to place local toll calls through the phone company of their choice--either the local telephone company or a long-distance carrier such as MCI, Sprint, AT&T; or one of many smaller rivals.

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Q: What will happen to rates?

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A: Rates for local toll calls--those to points more than 12 miles away within the same local calling area--will drop dramatically, by an average of 39% statewide. For example, a three-minute daytime call from Los Angeles to Anaheim or San Francisco to Sunnyvale, which now costs 75 cents, would drop to 36 cents as of Jan. 1.

However, rates for basic telephone use and other local phone services will rise--quite substantially, in some cases. Pacific Bell’s monthly residential flat rate will climb $2.90, or 35%, to $11.25. The basic residential rate at GTE, which has higher costs and a smaller customer base, will soar by $6.05 to $17.25.

The PUC projected that Pacific Bell’s median monthly residential customer bill will rise 42 cents to $22.73 beginning Jan. 1. In other words, half the company’s residential customers will see an increase of 42 cents or more, and the other half will see bills climb less than 42 cents or decline. GTE’s median customer bill will rise $3.48 to $25.15.

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Q: Why must the cost of basic telephone service go up?

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A: The PUC said the increases are designed to help make up for the revenue local phone companies will lose when they give up their monopoly in this $3-billion “local long-distance” market. Boosting the fee for local service also brings the price closer to what it actually costs the companies to provide the service, the commission noted.

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Q: Isn’t competition supposed to mean lower prices?

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A: Yes, but the phone system isn’t yet fully competitive. Basic service is still a monopoly. Eventually, state and federal policy-makers are to deregulate local service as well, theoretically ushering in lower phone rates overall.

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Q: Who stands to gain or lose the most?

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A: Residential and business customers who place frequent local toll calls will benefit the most. In many cases, the rise in their cost for basic telephone service will be more than offset by declines in their toll call bills. But customers who do not place such calls will face higher fees for basic service with no offsetting reductions.

Consumer advocates contend that big business will come out on top, with lower-income and elderly customers suffering the most because they do not place many toll calls. But a Pacific Bell official disagreed, saying these customers’ calling patterns differ little from those of other customers. About 20% of Pacific Bell’s customers make no local toll calls in a given month, the company said, but the official speculated that, as rates drop, more people will be inclined to make toll calls.

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Q: What about those who can’t afford the higher basic rates?

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A: Both Pacific Bell and GTE will continue to offer Universal Lifeline service, designed for low-income customers who otherwise would not be able to afford phone service. Their rates will increase, but not as much as regular customers’. Under the PUC’s plan, the flat rate for both companies will rise to $5.62. That represents a $1.44 increase for Pacific Bell and a 75-cent boost for GTE.

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Q: How will a customer place a local toll call through a competing carrier?

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A: Providing a boon to Pacific Bell and GTE, the PUC dictated that callers will have to dial a five-digit access code to reach any other company. If a caller does not dial a code, the local phone company will handle the call, as it does now.

Initially, callers will not have the option of signing up with a new carrier to routinely handle local toll calls and thereby circumvent the access code requirement, as they can with long-distance companies. However, long-distance carriers earlier this year asked the PUC to offer customers the chance to “pre-subscribe,” and the commission said Thursday that it will look into the idea soon.

A PUC regulatory analyst noted that many business customers with PBX or other special phone systems and residential customers with speed dialing can pre-program an access code. But she acknowledged that in the early going, the access code requirement will be advantageous to the local companies.

The New Rate Structure

The decision: The Public Utilities Commission has approved rules that will allow competition in the local long-distance market starting Jan. 1. These changes require a new rate structure for Pacific Bell and GTE so they can compete with long-distance carriers.

Background: When the old AT&T; was broken up in 1984, the seven regional Bell operating companies were created to provide local telephone service. The remnants of AT&T;, as well as competitors such as MCI and Sprint, were authorized to provide long-distance service.

LATAs: To define what would be a local call and what would be a long-distance call at the time of the AT&T; breakup, the nation was divided into Local Access and Transport Areas (LATAs), based on the Census Bureau’s Standard Metropolitan Statistical Areas.

Types of calls: Bell companies are prohibited from carrying calls between LATAs. These calls are the province of long-distance companies, though new federal legislation may soon allow local phone companies into the market. Within LATAs, calls between points more than 12 miles apart are toll calls, or “local long distance.” In California, the local phone company has had a monopoly on such calls. That will end Jan. 1.

SOME SAMPLE RATES

Opening California’s local long-distance market to competition will have a dramatic impact on telephone pricing, raising basic service charges but lowering local long-distance rates. Here’s a brief wrap-up. Rates for local long-distance calls are what Pacific Bell projects it will charge; competitors could charge less.

Rates between cities within a regional calling area would decrease an average of 44%:

Typical five- Typical five- minute daytime minute daytime call under old call under new Call rates rates Anaheim to Los Angeles $1.04 $0.60 Van Nuys to Downey 0.89 0.50 Riverside to Pasadena 1.34 0.75 San Bernardino to Calabasas 1.64 0.90

While bacis monthly service rates would increase:

Current New Monthly Monthly Company Service Rate Rate Increase Pacific Bell Residential flat rate $8.35 $11.25 $2.90 Residential measured 4.45 6.00 1.55 Business 8.35 10.32 1.97 Lifeline flat rate 4.18 5.62 1.44 GTE Residential flat rate 11.20 17.25 6.05 Residential measured 6.04 10.00 3.96 Business 10.47 19.22 8.75 Lifeline flat rate 4.87 5.62 0.75

Sample Pacific Bell phone bills, not including taxes, federal surcharges, optional services, or other long distance charges:

For a resident that uses flat rate service and makes two hours of local long-distance calls per month:

Old Plan: $34.84 New Plan: $26.08 For a resident that uses flat rate service and makes 10 minutes of local long-distance calls per month:

Old Plan: $10.64 New Plan: $12.53 Sources: Pacific Bell; California Public Utilities Commission; MCI. Researched by ADAM S. BAUMAN / Los Angeles Times

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