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Ol' Ma Bell's
Divestiture
l
Reaching out
for your wallet
Sometime during the first few months of
1984, Pacific Northwest Bell will reach out and
touch all of its customers with bigger bills to
pay.
The amount of the increase and the date of
implementation aren't certain yet, but rates
will go up, officials say.
Does this story ring a bell? Well, this time the
phone company is passing the buck for the
increase.
Breaking up is hard to do
Hiked-up rates,.phone company officials say,
will result from an anti-trust suit filed by the
U.S. Department of Justice against American
Telephone and Telegraph in the mid-1970s.
Ruling on the suit, a federal district court
judge for the District of Columbia called for
deregulation and divestiture of AT&T. In the in
terest of competition, Ma Bell hid to split up.
The Modified Final Judgement of 1982, as it is
called, ordered AT&T to relinquish control of
local phone companies in 1984. The Bell Com
pany will retain control of its long-distance ser
vice, its manufacturing subsidiary, Western
Electric and its research subsidiary, Bell
Laboratories.
But the nation's 22 local companies will
break away from AT&T, falling under the con
trol of seven regional, independent
Ma Bell's local customers can
expect larger phone bills next
spring, but in this barrage of
rate increases lies one benefit:
long-distance rates ; will go
down — eventually.
companies.
For example, U.S. West, headquartered in
Denver, will own Pacific Northwest Bell (serv
ing Oregon, Washington and Idaho), Moun
tain Bell (serving the Rocky Mountain states)
and Northwestern Bell (serving the Northern
Plains states).
So every local phone company now
mothered by Ma Bell will be out on its own
next year.
That's where the bigger phone bills come in.
Currently, the Bell Company overprices long
distance service to subsidize local rates, which
then can be priced lower than cost, says Bruce
Hall, PNB public relations director.
This benefits most telephone customers by
allowing for lower rates on a basic-need ser
vice by raising the price on an optional service.
Hall says.
After divestiture, local phone companies
won't benefit from national long-distance sub
sidies. They will have to price local service to
cover the cost of administration. Hall says. In
the meantime, long distance rates should go
down because they won't be hiked up to sub
sidize local service, he says.
"Competition is going to drive prices toward
cost," Hall says. Both long-distance and local
rates will reflect the actual cost of
administration.
The phone company doesn't like this. Hall
says.
"We fought very hard (against divestiture)
because we felt there was an advantage to the
consumers to leave it the way it was," he says.
The high price of competition
So the U.S. Department of Justice calls for a
free market of competition, AT&T breaks up
and every American who owns a telephone
pays the price.
Currently, the price tag is the center of atten
tion at PNB, the Federal Communications
Commission and the nation's various Public
Utility Commissions.
Hall says the FCC and the PUC have ordered
all phone companies to file applications for
"access charges," the additional amount
customers will have to pay for local service
after long-distance revenue subsidies are lost.
The PUC is still considering a rate schedule
filed by PNB.
Meanwhile, the FCC is reviewing the whole
concept of access charges. Last week, it
delayed deciding whether the burden of ac
cess charges should be placed on consumers
and how much the charge should be, Hall says.
Because of this delay, new rates may not be
implemented until April, instead of the earlier
Jan. 1 target, he says.
"We're down to just over two months before
we're supposed to be splitting up, and we've
got the FCC and the PUC and Congress still
changing the rules. It's frustrating," Hall says.
"All we know is that, because of divestiture,
access rates will go up," he says.
If the PUC approves PNB's suggested rates
— and if the FCC doesn't radically change the
whole process — customers can count on a $5
increase in their phone bill, starting next spr
ing, Hall says.
So the service that now costs customers
$13.05 will later draw $18 from their pocket
books, Hall says.
If customers feel they don't make enough
local calls to justify tf\is increase, they do have
an alternative. That option, called "measured
service," works somewhat like long-distance
rates.
Callers are billed five cents for the first
minute and two cents each additional minute,
so an average call of three minutes would cost
nine cents. Hall says.
Customers currently pay $7.65 a month tor
this service, which includes a $3 allowance for
local calls. Calls adding up to $3 are free;
anything after that will be billed in addition to
the $7.65.
Measured service customers who don't
make many outgoing calls can choose a
budget plan for $5.65 per month, which
doesn't include an allowance. Callers will be
billed for each call.
Starting next year, however, these options
will cost $11.90 and $9.90 if PNB's application is
approved, Hall says.
In this barrage of rate increases, however,
lies one benefit: long-distance rates will go
down — eventually. Because long-distance
rates won't be overpriced to subsidize local
rates, they will more closely reflect actual cost
of administration, Hall says.
But this decrease won't balance out the
phone bill for most customers, he says.
Long-distance rate decreases supposedly will
'Competition is going to drive
prices toward cost/
— Bruce Hall, PNB public
relations director
equal local rate increases for people who make
the average number of long-distance phone
calls per month. Hall says. But the majority of
customers don't make that many calls. That
figure is just driven up by the people who use
long-distance excessively, he says.
Hall says divestiture will cause PNB to beef
up advertising for peripheral services, such as
telephone stores and special features.
By pushing sales of extras, PNB could create
its own subsidy, in a way. Hall says.
“If we can generate more revenue through
these services then we will less frequently turn
to rate increases."
Story by Michele Matassa
Graphic by Shawn Bird
o.
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