Deregulated bills bigger for many
Talk is supposed to be cheap, but it keeps getting more expensive for millions of California customers because of a 2006 regulatory change designed to do the opposite.
AT&T; Inc. recently jacked up the price of call waiting, caller ID and other stand-alone features, the third rate hike in the last year. Those small fee increases add up fast, and they might only get worse. The hardest hit seem to be the elderly and the poor, who are most reliant on basic phone service.
When California officials deregulated service in 2006, they expected local prices to stay level or drop. The idea was that traditional land-lines would compete for customers with high-tech calling options delivered over the airwaves, cable TV wires and the Internet.
Instead, some prices have gone up.
In January 2009, California is scheduled to fully deregulate and do away with a cap on the price of basic land-line phone service. State regulators are considering whether to delay that move because they and consumer advocates worry prices will jump even more.
“Right now, California consumers appear to have come out the losers,” said Christine Mailloux, an attorney with the Utility Reform Network in San Francisco.
For example, customers of AT&T;, California’s largest land-line phone carrier, are now paying $5 a month to have anonymous calls blocked, up from $1.90 in 2006. The monthly plan covering wiring repairs inside a home has jumped to $6 from $2.99. Verizon Communications Inc., the No. 2 carrier, has also increased prices for some features, although not as frequently or dramatically.
Jay Pultz, an analyst at technology research firm Gartner Inc., said the companies have different strategies based on where they provide service in the state, but he wouldn’t be surprised if Verizon followed AT&T; with similar price hikes.
The incremental increases are aimed at California customers who buy features separately, rather than in prepackaged bundles of services such as call waiting, caller ID and voice mail. Rachelle Chong, a member of California’s Public Utilities Commission, said about 15% to 20% of phone customers statewide purchase features separately. Phone companies, which do not disclose those numbers, prefer bundles because they are more cost-effective to maintain and make customers less likely to leave for rival companies.
Many of those affected customers are poor or elderly and either can’t afford the bundles or are unwilling to switch to newer technologies such as cellphones or Internet calling.
Muriel Green is one of them. The 83-year-old Reseda resident would like to add caller ID to see who is on the other end when her phone rings. But with the cost rising -- AT&T; now charges $9.99 a month, up from $6.17 in 2006 -- Green said she couldn’t afford it.
She worries that soon she won’t be able to afford her only other extra feature, call waiting, which just jumped to $6 from $5 a month. It had been $3.23 a month when deregulation began in September 2006.
“If it’s $10 for caller ID, I absolutely do not need it,” said Green, whose monthly AT&T; bill now is about $22.
For decades, state officials controlled prices on local-phone service because the companies that provided it held monopolies, which gave them extra pricing power. But in 1996, federal regulators forced those companies to open up their networks to competitors.
A decade later, after having seen dramatic growth of cellphones and the advent of phone service delivered via cable TV and the Internet, the Public Utilities Commission decided that there was sufficient competition to let phone companies set their own local prices.
Phone companies said deregulation has given customers greater value -- more calling features for roughly the same price -- and those willing to buy packages of phone, Internet and cable TV service are saving money.
“Overall it’s fair to say that the prices of communications services have been going down. That’s not to say we haven’t increased the prices on an individual item here or there,” Verizon spokesman Eric Rabe said. “Frankly, if that encourages people to buy a package from us and save money, we’re happy with that.”
He noted that Verizon sells Internet service for $35 a month, phone for $50 and TV for $65 -- but offers all three in a bundle for $99.
Those deals can be beyond some people’s budgets. And deregulation shouldn’t force people to buy features they don’t want, said Bob Williams, director of Hearusnow.org, the telecommunications and media website for Consumers Union.
“The grandmas who still want their land-line with a phone with big numbers they can dial, their rates in a lot of cases have gone up because of deregulation,” he said. He added that phone companies are “just trying to gouge those customers.”
Californians aren’t alone in facing some price increases. Traditional phone companies have pushed states to ease regulations to give them more competitive flexibility as customers switch to wireless, cable or Internet calling. About 16 states have deregulated retail rates for calling features from large phone companies.
In Ohio, prices for stand-alone features also have been going up since the state deregulated in 2006, said Janine L. Migden-Ostrander, the state’s appointed consumers’ counsel.
“They nickel and dime you,” she said, noting that Verizon’s call forwarding feature there has risen to $3 a month from 75 cents in the last two years. “They increase rates by small percentages, but they are constant increases.”
California regulators are monitoring the increases and considering whether to allow a freeze on the rate for basic phone service to end in January 2009, the final step to deregulation, Chong said. She acknowledged that the commission expected rates to jump.
“We are concerned about the rate-shock issue,” she said.
Commissioners plan to decide by the fall to continue the freeze or limit rate increases over an extended period, Chong said. But she noted that those basic, no-frills rates -- $10.69 for AT&T; customers and about $17 for Verizon -- have remained roughly the same for a decade and are lower than in other high-population states.
Chong said deregulation was working in California, with traditional phone companies raising stand-alone features to reflect their true costs and compete with packages offered by cable companies and other new providers. “We are seeing some significant increases [in stand-alone features] and I’m sure that will impact the decision that low-income consumers make about whether they will continue to have those services or not,” she said.
“I think it’s fair to say the incumbent telephone companies are trying to up-sell people into bundles, but . . . they’re basically doing what their competitors are doing.”
AT&T; spokesman James Peterson said consumers liked bundles, and the company was constantly evaluating its prices to remain competitive.
“Our basic rate in California is one of the lowest in the country. . . . That being said, we won’t speculate on future pricing actions,” he said. “We know we have to provide the high level of service they’ve come to expect from AT&T;, at a competitive price, or they will go elsewhere. It’s that simple.”
But some customers have little choice. Although there is plenty of competition for packages of features from wireless or cable companies starting at about $30, people who can’t afford those have few low-cost choices. Often, their only option is to pay the increase or drop the feature.
Philip Spiegel, 70, of Los Altos, Calif., said he had paid a monthly fee to AT&T; to cover repairs of the phone wiring inside his house for years. But the recent increase to $6 a month might price the wiring fee out of his budget.
“I think that’s probably not a good deal,” he said. “I’ll probably just cancel the service.”
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Static on the line
Here are some of the monthly fees that AT&T; has increased for its local phone customers in California since deregulation.
*--* -- Sept. Jan. July Jan. Service 2006 2007 2007 2008 Caller ID $6.17 $7.99 $9.00 $9.99 Call waiting, call forwarding, three-way calling, speed dialing, other similar services 3.23 3.99 5.00 6.00 Rejection of anonymous calls 1.90 2.99 4.00 5.00 Repair of home phone wiring 2.99 3.99 5.00 6.00 *--*
Source: California Public Utilities Commission