Not Everyone Likes AT&T’s Soaring Landline Rates that Violate Deregulation Pledges

Monday, December 09, 2013

On one side of the complaint before California’s Public Utilities Commission (PUC) are 35 phone users and The Utility Reform Network (TURN), who say AT&T reneged on promises made when California landlines were deregulated in 2006 and raised rates to unconscionable levels.

On the other side is AT&T, with assets of approximately $272 billion.

Let the games begin.

The complaint, filed Friday, argues that AT&T has raised landline flat rates 115% and measured service 222% in the five years since the state deregulated basic rates. Inflation during that depressed economic time has been 14%.

“AT&T is robbing these consumers blind,” TURN Executive Director Mark Toney said in a press release: “Landlines are still essential for many, many California households, over half of which regularly use them. Customers have already paid for the copper wires, why should they be forced into more expensive services?”

Los Angeles Times columnist David Lazarus came up with even higher numbers than TURN when he reviewed what Carlsbad resident Steve Linke has paid over the years. Five years ago, Linke’s flat rate cost was $5.83 a month. That tripled to $15.37 by 2012, hit $18.25 this year and will go up another 16% to $21.25 on January 1.   

For years prior to 2006, AT&T’s regulated flat rate of $11.25 was 53% lower than the next lower rate, Verizon’s $17.25. It reflected the giant utility’s low-cost territory and economy of scale. Deregulation was not supposed to disturb the equilibrium.

But the increases fly in the face of assurances that competitive market forces would keep rates at “just and reasonable levels.” At the time of deregulation, AT&T had the lowest flat rates among the four big state carriers. Verizon, SureWest and Frontier are the other three. It now has the highest.  

So, TURN suggested in its complaint that the commission put arbitrary caps on the utility and review the wisdom of deregulation: “The Commission should promptly initiate the long-promised (since the end of 2010) and long-deferred review of the status of competition in the California telecommunications marketplace.”

The watchdog also wants the PUC to investigate whether AT&T and other utilities are using these skyrocketing rates to subsidize their video services.

An AT&T spokesman told Lazarus that the rates have gone up because fewer people are using landlines these days. So the cost of operations has to be spread among a shrinking number of consumers.

Lazarus asked Natalie Billingsley, a senior official at the PUC's consumer-protection arm, the Division of Ratepayer Advocates, what she thought of that explanation and Billingsley responded with a one-word answer that family newspapers aren’t allowed to print. The company, she pointed out, has already paid for its landline network and almost all of its infrastructure expenses are for wireless upgrades.

As for deregulation in general, Billingsley again did not mince words. “It has substantively been a failure. All we have seen since deregulation is a constant increase in prices,” she said.  

A lot of the landline market has already shifted to wireless and more is headed that way. Some cynics think AT&T is jacking up landline rates and “essentially harvesting” its customers, who they would just as soon see move to wireless.   

–Ken Broder


To Learn More:

Consumers Complain to CPUC, Demand Refunds from AT&T (The Utility Reform Network)

Since Deregulation, Landline Costs Skyrocket (by David Lazarus, Los Angeles Times)

AT&T's Deregulation Campaign (by Leticia Miranda, The Nation)

AT&T Deregulation Wallops Californians in Their Wallets; Rates up 222%, Despite Competition Claims (by Phillip Dampier, Stop the Cap)

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