Getting hung up on basic phone rate increases

AT&T customers saw their monthly rate for basic residential phone service jump 22% this month to $16.45. The increase followed a 23% rate hike last year.

And you know what? That’s the good news.

The bad news is that, beginning in January 2011, AT&T and other phone companies will be permitted to jack up basic rates as much as they want -- no regulatory limits will apply.

“If you want to know what will happen then, look at how much their rates went up for directory assistance and call waiting and other services that were deregulated in 2006,” said Denise Mann, who oversees telecom matters for the California Public Utilities Commission’s consumer-watchdog division.

“It will make your head spin like Linda Blair,” she said.

That’s putting it mildly. AT&T’s charge for an unlisted number has soared more than 345% since rates were deregulated four years ago, from 28 cents to $1.25, according to the PUC’s Division of Ratepayer Advocates.

The company’s charge for directory assistance has climbed 226%. The cost for call waiting is up 85%.

So far, however, rates for basic residential service charged by AT&T, Verizon and other phone companies have remained under state regulators’ control.

Regulators threw a bone -- a small one -- to consumer advocates during the deregulation process. Rate increases for basic phone service were temporarily limited to no more than $3.25 a year. Basic service includes local and 911 emergency calls.

“For the working poor, keeping residential service affordable can make all the difference,” Mann said. “This was the one thing that we really worked hard to protect. We laid our bodies on the tracks for this.”

Beginning next year, however, all bets are off. “The sky’s the limit,” Mann said.

AT&T is already off to a flying start. It has raised the cost for basic phone service more than 50% over just two years.

Gordon Diamond, an AT&T spokesman, said this month’s rate hike “represents only the second time in 16 years AT&T has increased its rate for basic phone service.”

That’s one way of looking at it. Another is that the state froze the rate for basic phone service for most of that time, so AT&T hit customers with double-digit increases in both years it was allowed to do so.

Diamond said the higher rates reflect changes in the cost of living over the 14 years that rates were frozen.

If so, AT&T has overcompensated just a tad. The consumer price index rose about 45% from 1994 to 2008, according to the federal government’s Bureau of Labor Statistics.

Diamond declined to say whether AT&T’s costs for providing basic phone service rose by a commensurate amount over the period. Nor would he speculate on what the company will do next year, when its regulatory leash is removed.

For its part, Verizon boosted its charge for basic residential service last year to $19.91 monthly from $17.66, or about 13%. The company says it has no plans for another rate hike this year.

“We feel this is the right rate,” said Jon Davies, a Verizon spokesman.

He too declined to speculate on what might happen when the regulatory cap disappears next year. “That’s too far ahead,” Davies said.

When the PUC voted in 2005 to deregulate most phone rates, it said the California telecom market was sufficiently competitive to justify leaving phone companies to their own devices.

The thinking was that market forces would safeguard consumers by pushing prices lower. That hasn’t happened.

“Market forces have not yet met the challenge of controlling price increases,” the Division of Ratepayer Advocates concluded in a 2008 report. It called for prices to be regulated until officials get a better fix on whether people can afford basic service.

So far, it doesn’t seem like the industry-friendly PUC is in any hurry to help consumers.

Down in flames

At least one state lawmaker believes phone customers should be given fair warning before rates go through the roof.

Sen. Fran Pavley (D-Agoura Hills) introduced a bill that would have required at least 60 days’ notice of changes to phone customers’ service, and for the changes to be featured prominently on monthly statements -- not unreasonable requirements.

So what happened?

The Senate Energy, Utilities and Communications Committee voted down the legislation this month.

Pavley told me that AT&T and Verizon lobbied aggressively to torpedo the measure, arguing that it would be, well, too much hassle to have to provide more than the currently required 30 days’ notice or to make changes to their bills.

AT&T’s Diamond said phone companies “simply explained why the bill was not necessary.”

Verizon’s Davies echoed that sentiment. “Sixty days seems kind of excessive,” he said. “And apparently the members of the committee felt the same.”

Pavley said the phone companies cited PUC data showing that hardly anyone has complained about the telecom giants’ notification procedures.

“I just have to wonder how many people know who to complain to,” Pavley said, “or even that they have a right to complain. This bill was intended to help protect consumers.”

Sen. Ellen Corbett (D-San Leandro) was the sole committee member to vote in favor of the legislation.

Voting against the bill were Chairman Alex Padilla (D-Pacoima), Vice Chairman Bob Dutton (R-Rancho Cucamonga), Dave Cox (R-Fair Oaks), Jenny Oropeza (D-Long Beach), Joe Simitian (D-Palo Alto), Tony Strickland (R-Thousand Oaks) and Roderick Wright (D-Inglewood).

Abstaining were Christine Kehoe (D-San Diego) and Alan Lowenthal (D-Long Beach).

Keep these folks in mind the next time you think your phone company is pulling a fast one on you.

David Lazarus’ column runs Wednesdays and Sundays. Send your tips or feedback to