Since deregulation, landline costs skyrocket

When California’s telephone market was deregulated in 2006, consumers were told that increased competition would improve service and reduce prices.

It hasn’t worked out like that.

Carlsbad resident Steve Linke has received so-called measured service from AT&T for five years. That means he pays a flat rate each month for a limited number of local calls on his landline phone.

“It’s for peace of mind,� Linke, 45, explained to me. “If there’s an earthquake or some other major emergency, it’s nice to know that we’d still have a landline to call out on when the cell towers go out.�

When Linke first signed up for measured service, the rate was $5.83 a month — a relative bargain for knowing that you won’t be cut off from the world when the whip comes down.

By the beginning of 2012, AT&T’s monthly rate had nearly tripled to $15.37. At the beginning of this year, it rose 19% more to $18.25.

And as of Jan. 1, the rate will climb an additional 16% to $21.25.

That means the monthly cost of measured service has soared more than 260% since Linke first signed up with AT&T in 2008. Not exactly what state regulators had promised.

Meanwhile, quality of service declined substantially earlier this year when AT&T slashed the number of minutes available under its measured plan 25%, to 168 a month from 225, and raised the price of extra service to 6 cents from 4 cents a minute.

Again, not what officials said would happen.

Linke is one of at least 30 AT&T landline customers joining a complaint to be filed Friday with the California Public Utilities Commission. The Utility Reform Network, a San Francisco consumer advocacy group, said it’s lodging the complaint on behalf of all AT&T customers.

A draft of the complaint alleges that AT&T’s rates for measured and flat-rate service far surpass “just and reasonable levels� and are the highest of all phone companies’.

“AT&T’s rates should be reduced to just and reasonable levels and should be capped at those levels� until regulators can review the company’s pricing, the draft says.

AT&T declined to comment on the draft complaint.

Natalie Billingsley, a senior official at the PUC’s consumer-protection arm, the Division of Ratepayer Advocates, didn’t mince words when I asked about the effect of phone deregulation.

“It has substantively been a failure,� she said. “All we have seen since deregulation is a constant increase in prices.�

That’s not just for measured plans like the one Linke has. There have been double- and triple-digit rate hikes for nearly all phone services, from call waiting to call forwarding, even though those services are automated and cost phone companies almost nothing.

A 2010 report by the state Senate’s Office of Oversight and Outcomes found that, thanks to deregulation, the cost of an unlisted phone number in California had skyrocketed more than 600%.

“The market is not sufficiently competitive to restrain these price increases,� Billingsley said. “Otherwise, we wouldn’t see them.�

Lane Kasselman, an AT&T spokesman, said monthly rates for the company’s measured service have climbed because the number of people with a landline has sharply declined.

“The cost of running our traditional wireline network is increasingly spread among fewer and fewer customers,� he said.

I passed that along to Billingsley, who responded with a word I can’t print here.

She pointed out that AT&T’s landline network has been around for decades and is basically paid off. Moreover, it’s not as though the company is spending billions to upgrade its landline system. All that money is going into wireless these days.

“What you have to remember,� Billingsley said, “is that, by law, phone companies are required to share their landline networks with competitors. They don’t have to do that with wireless. So they’re doing everything they can to push people into wireless.�

Verizon has been less aggressive than AT&T with measured-rate customers. Jarryd Gonzales, a Verizon spokesman, said customers pay $13.40 a month for $3 worth of local calls. Prices vary throughout the day, he said, but average about a penny a minute.

In other words, Verizon measured-rate customers get roughly 300 minutes a month, or nearly twice the number that AT&T customers receive, for a significantly lower price.

Linke said he’d happily switch from AT&T to Verizon, but, of course, the two companies don’t offer landlines in the same areas. That would be too competitive.

I suspect that neither AT&T nor Verizon would shed a tear if they could get away with shutting down their landlines completely, which a growing number of states seem open to allowing.

Florida, North Carolina, Texas and Wisconsin are among those that already have passed laws permitting phone companies to end landline service. AT&T and other telecom companies failed in a bid to weaken California landline regulations this year.

In the meantime, prices will keep going up and service will keep diminishing.

And Linke, who wanted a landline in case of emergencies, said he’ll now be switching to an Internet-based phone system, which wouldn’t be available in the event of a major power failure.

“No more peace of mind,� he said.

David Lazarus’ column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to [email protected].