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Toll Call Costs to Fall, but Basic Rates Will Jump


The state Public Utilities Commission ruled Friday that Californians will be able to place local toll calls using the carrier of their choice beginning Jan. 1. But the commission said local phone companies could more than double residential customers' basic rates to help pay for the lower toll charges.

Business customers, who make most of the regional long-distance calls, could end up the big winners. In response to the ruling, the Pacific Telesis Group announced that it will slash the price of such calls 40% to 60% beginning next year--the largest price cuts in the company's history.

But the long-expected overhaul of California's telephone rate structure could carry a hefty price for residential customers who do not make much use of "local long-distance" service, which would include calls between Los Angeles and Riverside, for example.

The flat rate for Pacific Bell residential customers will increase 56% to $13 a month. Monthly charges for GTE's residential customers will jump 96% to $17.80. Consumer advocates say the poorest residential customers and many of the elderly will pay more, though phone company officials say the rate changes will produce a savings for most households.

Flat rates for business customers will be going up as well. Pacific Bell customers will face a 30% increase, to $10.86 from $8.35. The basic rate for GTE business customers will balloon 175%, rising to $25.04 from $9.10. Still, regulators and the carriers say most businesses will save substantially because of their heavy use of toll calls.

The rate hikes are meant to compensate local phone service providers for the revenue they expect to lose as a result of lower long-distance rates. Phone companies say those charges traditionally have been used to subsidize the estimated $26 a month they say it costs to provide phone service to every home in California.

Pacific Telesis' new long-distance rates are expected to be matched by its newfound competitors as long-distance powerhouses American Telephone & Telegraph, MCI and Sprint begin to compete for California's $2-billion-plus toll-call market. (GTE did not say Friday how much it plans to cut toll rates.)

In ruling on the rate hikes, the PUC passed over a staff proposal that recommended much smaller increases in basic charges; the commission even exceeded Pacific Bell's suggested hike by a few cents.

Instead of the staff proposal, the PUC appeared to adopt Commissioner Norman Shumway's plan, which the former Republican congressman has said was aimed at helping modernize the state's phone system with one big rate increase, rather than "prolonging the agony."

Some consumer groups charged that the PUC had failed to protect the consumer in its haste to usher in a new competitive era.

"The commission has completely sold out Californians," said Regina Costa, telecommunications analyst at Toward Utility Rate Normalization, a consumer advocacy group in San Francisco. "They're basically supporting Pacific Bell's entrance into competitive markets on the backs of captive customers."

Critics of the utility have complained about a corporate restructuring that will spin Pacific Telesis' cellular phone operations off to a separate, unregulated company.

TURN estimates that 80% of low-income households will experience a substantial increase in monthly phone bills.

Mike Miller, Pacific Bell vice president for competitive readiness, countered that even low-income households tend to make a significant number of toll calls. He said he expects the average residential customer's bill, including long distance, to decrease from $38.44 to about $36.97.

California follows several other states in moving to open phone service to increased competition--and reducing the residential service subsidy provided by long-distance calls. Long-distance carriers long have eyed the state's 18-million telephone users as an especially lucrative market.

"I cannot begin to tell you how excited we are about competition in California," said Sprint spokesman Norman Black. "There is no state that begins to compare to it in terms of population, and you better believe we're going to be taking advantage of it. This is a tremendous opportunity."

The breakdown in local telephone monopolies is expected to extend next into local service, as phone companies team up with cable television firms to provide a variety of new telecommunications services and as cellular phone firms extend their reach into local markets.

The PUC said a Pacific Bell customer making a five-minute local toll call costing $1.00 today will pay 49 cents for the same call beginning Jan. 1. A GTE customer making a five-minute local toll call for $1.00 today will pay 66 cents next year.

Toll calls are those that go beyond a certain distance or calling radius from one's home or business. Calls beyond that "circle" are toll calls, irrespective of area code.

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