AT&T to raise landline phone service by more than 20 percent
For the second time in two years, AT&T is raising local landline phone rates by more than 20 percent.
The phone giant plans to start informing customers next week that charges for basic phone service will jump from $13.50 a month to $16.45 on Jan. 2. AT&T also plans to raise the rate for its LifeLine service for low-income customers, by 73 cents to $6.84 a month.
The moves will affect half of the company's 6.5 million phone customers in the state. Those who subscribe to newer, bundled service packages generally won't be affected.
AT&T wants to move its prices to "market levels" after they were capped for 13 years by the California Public Utilities Commission, said company spokesman Gordon Diamond.
But consumer advocates questioned both the need and the timing of the price increase. They noted that it comes amid a recession, when many consumers are struggling financially.
"There's nothing in the economy or the cost of providing phone service that would justify a 22 percent increase," said Harvey Rosenfield, founder of Consumer Watchdog.
The price hikes were approved last year by the PUC. Determining that the market was competitive, the commission decided to lift nearly all regulation on basic phone rates after a two-year transition period.
In recent years, growing numbers of consumers have turned off their traditional landline phone service in favor of competing services from cable companies, wireless phones or voice over Internet providers.
But most of these competitors tend to offer local phone service as part of a bundle of other services, such as Internet access and pay-television channels, or as part of relatively pricey unlimited calling packages. Few offer a basic local phone plan.
In other words, there's no competition to determine what a market price for such a plan should be, consumer advocates noted. The only thing that's been keeping prices down has been the PUC — and it's getting out of that game, they said.
"Once you give AT&T permission to raise rates, raise rates is exactly what it's going to do, what it has done and, unfortunately, what it's probably going to continue to do," said Mindy Spatt, a spokeswoman for The Utility Reform Network, a San Francisco-based consumer advocacy group.
The price hikes come as the amount that phone companies can charge for voice services has generally been falling, thanks to competition and new, lower-cost technologies.
Unlike AT&T, SureWest, which is the traditional local phone provider in the Sacramento area, has no plan to raise rates on its local phone service, said company spokesman Ron Rogers. SureWest hasn't raised rates since 1997, he said.
"We haven't found the need to raise any rates," Rogers noted. "There are no outside costs causing us to pass along any increase in rates to customers."
Verizon, which raised rates in January, has no plans for additional increases, spokesman Jon Davies said.
AT&T's Diamond said the rate hike was needed in part to maintain the phone network. Even with the increase, he added, AT&T local landline phone rates are still lower than those charged by SureWest and other local phone companies.
But telecommunications companies have typically raised rates on stand-alone services such as voice not because of increased costs, but to encourage customers to purchase a bundle of services, said Jeff Kagan, an independent industry analyst.
"They have to (offer service bundles) to remain competitive to the cable companies," Kagan said.