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After Brief Respite, Consumers Face More Telephone Upheaval

August 30, 1987|BRUCE KEPPEL | Times Staff Writer

WASHINGTON — A classic Regulator brand clock, its pendulum stilled and its hands perpetually marking 4 o'clock, hangs on the wall of the spacious corner office that Dennis R. Patrick inherited from Mark S. Fowler this year upon becoming chairman of the Federal Communications Commission. "It said Regulator ," Patrick told a visitor, "so I stopped it."

The clock seemingly also has stopped--but only momentarily--in the fast-changing telecommunications industry.

The Patrick-led FCC is awaiting comment on a proposal it made earlier this month to loosen its regulatory grip over American Telephone & Telegraph's profits. Also, U.S. District Judge Harold H. Greene is holding off until this fall on deciding whether to let AT&T's offspring, including San Francisco-based Pacific Telesis Group, enter such fields as equipment manufacturing, electronic information services and long-distance calling--activities prohibited by the antitrust settlement that broke up the Bell System in 1984.

Before long, though, 36-year-old Patrick and 64-year-old Greene are likely to trigger further upheaval in an already tumultuous industry. In the meantime, they are weighing the economic efficiency and scientific advances that might be unleashed by increased deregulation versus the potential threat to competitors and to ordinary telephone customers.

The issues before Patrick and Greene will set the ground rules under which once-monopolistic AT&T, whose Bell System for a century provided reliable phone service but little else, and others can adjust to a more volatile, computerized world offering telecommunications services that would have boggled Alexander Graham Bell's mind.

Regrets Bell Breakup

"This is not a static environment," said Patrick, a native Southern Californian, in an understated style that contrasts with the more bombastic approach of Fowler, his predecessor. "We're dealing with a moving target. And the market is changing very, very rapidly."

Since the Bell breakup, which Patrick regrets, consumers have had to put up with a succession of sometimes-bewildering changes and aggravating, seemingly inexplicable new charges on their local phone bills. Consumers have had to decide whether to buy phones they previously could only lease; they've found themselves, rather than their phone companies, suddenly responsible for repairing the phone wires in their homes, and they have been paying a mysterious and rising "subscriber line charge" imposed by the FCC--now $2.60 a month--in exchange for cuts that have totaled 33.5% in long-distance rates.

The FCC has been responsible for most of these unsettling changes, including the highly unpopular subscriber line charge, about which Patrick says: "My mother always complains when I visit." Now the commission is poised to stir matters up further.

Patrick and his three commission colleagues (there is one vacant seat) on Aug. 4 proposed eliminating ceilings on how much AT&T can earn on its shareholders' investment, or its rate of return, in favor of setting maximum prices for long-distance services. The FCC's aim, Patrick said, is to create incentives for AT&T to cut costs and improve its technology by letting the company keep part of any savings it achieves within the price limits. Consumers would benefit from a periodic cut in the price limits, he said.

The proposal quickly won rave editorials from Business Week and the Wall Street Journal but drew equally prompt cries of alarm from consumer groups.

In requesting comment, the commission noted that, even before the breakup of the Bell System, the convergence of communications and computers had prompted the FCC to modify its regulatory approach. The commission has sought to encourage new electronic services and foster competition in emerging fields while keeping ordinary telephone service affordable.

But the breakup of the Bell System prompted further regulatory adjustments, triggering a chain of events that led to the FCC's proposal this month. For one thing, divestiture brought an end to the free flow of revenue among the various parts of the Bell system. To replace the complex web of contracts and tariffs that fed the monolith, the FCC reduced the connection charges paid by AT&T and its long-distance competitors to local telephone companies and imposed subscriber-line charges on businesses and homes.

The residential line charge was originally intended to be $6 a month, but the FCC retreated after Congress reacted to a storm of consumer outrage. Consequently, a joint board of state and federal regulators devised the current schedule under which the levy rose from $2 to $2.60 on July 1 and is to increase to $3.20 on Dec. 1, 1988, ultimately reaching $3.50 four months later.

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