Landline rates just going skyward

February 12, 2013|DAVID LAZARUS
  • Lane Kasselman, an AT&T spokesman, defended the latest price hikes by saying they “reflect changes in the marketplace.” Above, the company's headquarters in Detroit are shown in 2007.
Lane Kasselman, an AT&T spokesman, defended the latest price hikes… (Paul Sancya, Associated…)

Joseph Aguon believes in preparing for the worst. So even though he makes most of his calls using a cellphone, he maintains a landline at his home in L.A.'s Fairfax neighborhood -- just in case an earthquake or storm knocked out wireless service.

But Aguon, 61, is finally ready to cut the cord, not because he's less mindful of potential disasters, but because AT&T keeps jacking up his rates.

I've heard from dozens of AT&T customers in recent weeks about big jumps in their bills for basic landlines and measured phone service, which provides customers with a fixed number of local calls each month.

Welcome to the exciting world of deregulation, where state officials allow phone companies to do as they please in hopes of encouraging a more competitive marketplace.

For The Record
Phone rates: In the Feb. 12 Business section, a column about rising rates for basic telephone service said that Verizon had raised its monthly rate for basic phone service by $1.90 in 2010. The monthly increase was $1, to $20.91.

In Aguon's case, he paid about $20 for his landline in 2011. Last year, the cost rose 15% to $23. Now he's learned his monthly bill has climbed an additional 26% to $29.

That's a 45% rate hike in just two years. And did Aguon's service improve appreciably during that time?

"Not at all," he told me. "It's a landline. You call people. People call you. It's a landline."

Like Aguon, Peter Nardi, 65, maintains a landline at his Los Feliz home just to be on the safe side. His measured service plan cost $12 a month in 2011. It now runs $18.

"That's a 50% increase," Nardi said. "So I called AT&T to complain."

What did the company say?

"They apologized but said there was nothing they could do."

In fact, AT&T can do whatever it wants.

Since 2011, the California Public Utilities Commission has allowed phone companies to raise -- or lower -- basic phone rates whenever they choose, rather than seek approval from regulators. Since then, costs have steadily gone up.

Jarryd Gonzales, a Verizon spokesman, said the company raised its monthly rate $1.90 for basic phone service to $20.91 in 2010. He said the rate will climb again, to $22, next month.

"They're doing it because they can do it," said Bill Nusbaum, managing attorney for the Utility Reform Network, a San Francisco advocacy group. "The PUC has turned its back on the market."

That's not how AT&T would characterize things. Lane Kasselman, a company spokesman, defended the latest price hikes by saying they "reflect changes in the marketplace."

He said there's more competition for new wireless services such as phones you can plug into any outlet and access your home number. "Prices are going down for the products that people are moving to," Kasselman said.

Perhaps. But that doesn't justify higher prices for the products that people have had for decades. A 50% rate hike in just two years?

"That's not the right way to look at it," Kasselman replied. "You have to look at it from 1994. Our rates were frozen for 14 years."

Um, no. AT&T's and Verizon's rates were regulated for 14 years, meaning that state officials had to approve any price increases. If phone companies could make a reasonable case for why they needed to increase prices, they could do it.

According to the PUC's Division of Ratepayer Advocates, AT&T charged $10.69 a month statewide for its cheapest basic phone service in 1994. The rate remained unchanged until 2008, when it rose to $10.94 -- and continued rising every year to $23 now.

Verizon charged $16.85 for basic phone service in 1994, climbing to $17.25 in 2008 and hitting $22 next month.

Talk about making up for lost price hikes: Since the middle of the Great Recession, AT&T has raised basic rates 115% and Verizon will have hiked them nearly 31% as of next month.

The fact that prices for landlines remained relatively stable under regulation reflects the fact that in officials' eyes, the companies were making a fair profit. They certainly weren't losing any money offering these services.

Now that their regulatory leashes have been removed, all that extra revenue is just gravy.

Nearly a third of all U.S. households are now completely wireless, according to a government report released last year. That means 69 million adults and 27 million kids have cut the landline cord.

AT&T's landline revenue has fallen about 16.5% over the last four years. Verizon's landline revenue has dropped about 19%.

Yet even as the number of people with landlines steadily dwindles, Nusbaum at the Utility Reform Network said AT&T and Verizon are socking landline customers with ever higher rates.

"They're basically funding other things and paying off debt on the backs of landline customers," he said.

The companies are also using higher landline prices to prod customers into going wireless and thus relieve AT&T and Verizon of the financial burden of investing in older networks, Nusbaum said.

If so, the effort seems to be working. Both Aguon and Nardi said they're planning to cancel their landlines because of the rate hikes.

Call that a win-win for the phone companies. If people stick with their landlines, AT&T and Verizon clean up with sky-high rates. If people switch to wireless, that's more business for the products the companies want to focus on.

"We think people have more choices than ever before," AT&T's Kasselman said.

Except they're of the damned-if-you-do-damned-if-you-don't variety.



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