PacBell Local Toll Call Rates to Be Cut by 29%

The price of local toll calls will drop by about 29% in September for Pacific Bell’s residential and business customers, a move ordered by state regulators to offset planned subsidy payments to the phone company.

Regulators at the California Public Utilities Commission approved the toll price cut--as well as smaller reductions in other service prices--as the best way to rebate $305.2 million to customers of PacBell, the state’s second-largest phone company.

“PacBell seems to be taking credit for this, but it’s not costing them a cent,” said Paul Stein, a telecommunications attorney for the Utility Reform Network, or TURN, a San Francisco-based consumer advocacy group. “But for customers, it’s a substantial chunk of money--$305 million.”

Beginning Sept. 1, PacBell’s basic rates for local toll calls--phone calls that connect beyond the 12-mile free zone but not far enough to be categorized as long-distance--will drop by a few pennies per minute for both business and residential customers.

The prices will vary by distance and time of day, but PacBell estimates that customers who don’t make many toll calls may see savings of only a few cents to a few dollars a month. Heavy toll call customers could save as much as $10 to $35 a month, according to company estimates.

Business customers could save from $9 to $20 a month, PacBell said.

Callers on discount plans will see slightly different rate reductions. Customers on PacBell’s residential discount toll plan, for example, now pay regular rates for the first $5, then receive a 15% discount on subsequent toll calls. After Sept. 1, those customers would see a 29% cost savings for the initial $5 in calls and a 14% discount on subsequent charges.

The state plan also includes a 10-cent reduction in the monthly price of many of PacBell’s calling features, such as call waiting, call forwarding and call return, as well as cuts in the per-minute cost of calling card rates and “zone usage measurement” and “local usage” rates.

In addition, the new plan slashes by 36.3% the “local access charges” that PacBell charges long-distance phone companies to connect calls over its network. The three largest long-distance companies--AT&T;, MCI and Sprint--have all pledged to pass the new savings on to customers, and state regulators intend to hold them to the promise.

The wide-ranging price changes--which won’t cost PacBell anything--are part of a broad restructuring of the state’s program for subsidizing phone service for higher-cost rural areas in the state.

Under the old method, the rural subsidies were invisible to customers because they were paid through inflated prices on some phone services.

Under the new system, which began in February 1995, the subsidy appears on phone bills as a separate “California High Cost Fund B” tax. Now state regulators plan to give phone companies their share of the high-cost fund and eliminate the longtime subsidies that still lurk in service prices.

Regulators estimate that PacBell will receive $305.2 million a year from the new fund, and thus the company and the PUC reduced PacBell prices by that amount.

Of the $305.2 million, about $154 million in reductions is directed at the local toll market, where PacBell faces stiff competition from rivals. The plan includes $80.5 million in price cuts on monopoly rates, such as local usage charges; about $7.1 million in discounts for custom calling features; and $63.6 million in access fee cuts for long-distance companies.

Customers will eventually get a credit on their bills to make up for the double payments between February 1995 and September of this year, according to the PUC.

TURN’s Stein credited the PUC for spreading the price reductions to services where PacBell faces no competition in addition to lowering toll rates.

“They’ve had the ability to lower those toll prices on their own for the last five years,” Stein said. “This proposal is a bit like the sleeves off their vest.”

Later this year, the PUC will decide how to provide price reductions to customers of GTE and other local phone companies.