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Money, that is, as rates go up

Low-cost local telephone service is headed the way of hand-crank phones and party lines. Last week the Federal Communications Commission announced that next year local phone companies will be allowed to reach out and touch everybody for an additional $2 a month for a residential line, rising to $3 in 1985 and $4 in 1986. The increases come on top of other new charges sought by local phone companies as a consequence of their upcoming January 1 spin-off from American Telephone & Telegraph. Result: the basic charge for phone service, now about $10 a month across the U.S., will probably double in the next three years.

Local rates have been artificially low for years because state and federal regulators have required Ma Bell to use revenues from long-distance tolls to subsidize basic phone service. But in order to encourage sharper competition among AT&T and such new rivals as MCI and GTE Sprint, the FCC decided to do away with inflated long-distance rates. The agency ruled that when AT&T spins off its regional operating companies on New Year's Day, it will stop paying local subsidies, which now amount to about $10.7 billion. The new $2-a-month local charge is intended to help the operating companies compensate for the lost subsidies.

The local companies have already applied to state public service agencies for steep rate increases. In Texas, Southwestern Bell wants to boost rates by $1.2 billion, claiming that the AT&T breakup will cut its revenues 45% while reducing operating expenses only 15%. In California, Pacific Telephone & Telegraph is seeking an increase of $1.2 billion, which would double the current monthly charge of $7 a household. Some observers, like FCC Chairman Mark Fowler, consider the requests opportunistic. Said he: "I suspect a hefty portion of these proposed increases may be an effort by the local companies to use the dramatic changes in the industry as an excuse to seek higher rates than warranted."

The FCC's approval of some increases may still get disconnected in Congress, where many legislators fear high local rates could make phone service too expensive for the elderly and the jobless. A bill proposed in the Senate by Republican Robert Packwood of Oregon and in the House by Democrat John Dingell of Michigan would nullify the FCC action and place surcharges on long-distance phone companies in order to restore some subsidies for local rates. The legislation, which would eliminate the FCC's planned extra charges, has solid support. Politicians know that as soon as phone bills back home jump, phones in Washington will start jangling off the hooks. This file is automatically generated by a robot program, so viewer discretion is required.