Basic Phone Fees to Rise, Toll Call Charges to Fall : Deregulation: The PUC action caps seven years of tempestuous hearings. It meets with wide criticism.
In a long-awaited ruling that will dramatically alter telephone pricing in California, the state Public Utilities Commission on Thursday opened so-called local long-distance calling to competition beginning Jan. 1.
As part of the policy change, the commission approved a substantial increase in basic local service charges--some GTE customers’ rates will climb as much as 80%. But prices for local long-distance, or toll calls--defined as calls between points more than 12 miles apart but within local calling regions--will plummet as long-distance companies such as AT & T and MCI enter a market currently reserved for Pacific Bell and GTE.
The controversial decision--which caps seven years of tempestuous hearings and deliberations--is the first step in the arduous process of deregulating telecommunications in California, which lags far behind most of the nation in promoting phone service competition. The commission actually delivered a final ruling on toll calling a year ago, but was forced to rescind it after it was learned that a Pacific Bell employee helped write it.
As expected, Thursday’s ruling drew criticism from most of those involved in the telephone regulation process: Consumer groups decried the local service rate increases, long-distance carriers complained about cumbersome access codes that customers will have to dial to use a carrier other than the local phone company, and Pacific Bell and GTE--though generally pleased with the ruling--grumbled about not getting the changes they sought. Pacific Bell had wanted to cut toll rates further while GTE was concerned that increases in basic rates were insufficient.
According to the utilities commission, more than half of California’s residential customers will end up paying more for phone service under its new rate structure, with GTE customers having bigger increases than Pacific Bell customers. The median phone bill will rise 2% for Pacific Bell customers and 16% for GTE customers, and consumers will face a confusing array of new choices for local long-distance calls.
Large businesses, and anyone who makes a lot of local long-distance calls, can look forward to substantially lower bills. Calls between Los Angeles and Riverside, for example, or between Anaheim and Santa Monica are toll calls.
The increase in basic service is designed to offset revenues Pacific Bell and GTE are expected to lose when they surrender their monopolies in the $3-billion local long-distance market. The monthly flat rate for Pacific Bell residential customers will increase 35% to $11.25 from $8.35. For GTE customers, the monthly flat rate will leap 54% to $17.25 from $11.20.
“The consumer is getting the shaft here,” said Audrie Krause, executive director of Toward Utility Rate Normalization, a San Francisco-based advocacy group. The hardest-hit group will be the estimated 20% to 30% of phone customers who don’t make toll calls monthly, mostly elderly people or working poor who don’t qualify for discounted lifeline rates.
Businesses that make many toll calls will be the big winners. Rates for daytime toll calls, made mostly by businesses, will fall an average of 44% under the commission’s ruling--and they could fall even more depending on how aggressively the nearly 100 long-distance carriers compete for a piece of the market.
But small businesses that make few local long-distance calls will end up paying substantially more under the new plan. GTE’s monthly basic business rate is going up 83% to $19.22. Pacific Bell’s monthly basic business rate is rising 24% to $10.32.
The long-distance industry is furious that the new policy does not require Pacific Bell and GTE to provide so-called 1-plus dialing for toll calls. Although a customer who uses, for example, MCI for regular long-distance service only needs to dial a 1, the area code and number, the same customer using MCI for local long distance will have to dial a five-digit access code first. They will also have to know the toll call boundaries in order to know when to use the codes.
“This is not real competition,” Krause said. “People are going to have to get out maps and books and study them. . . . It’s going to be very confusing.”
MCI denounced the access code requirement as a “Rube Goldberg-like process” and a “Pacific Bell ruse” that would thwart the development of true competition. The commission, noting that it is not technically possible to implement 1-plus dialing by Jan. 1, sided with Pacific Bell and GTE, which argued that such a requirement would be unduly expensive to implement and thus would force more local rate increases.
MCI and AT & T urged the commission Thursday to speed up hearings on ordering the local carriers to install the technology making equal access calling possible.
Pacific Bell President David Dorman contended that even with new basic rate increases, customers will still pay less than the true cost of providing the service. But he praised the commission’s ruling, saying it gave Pacific Bell the ability to compete with long-distance companies--which he said had already siphoned off $500 million in toll call business.
Although long-distance companies can’t compete directly for the toll business now, some corporations have installed technology that allows them to bypass the local phone company and link directly with a lower rate long-distance company, Dorman said.
* CONSUMER IMPACT: How the new ruling affects your phone bills. D1
