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Public Utility De-Regulation: A Losing Game for Consumers

By Jon Fox
Consumer Advocate

Earlier today, the San Francisco Chronicle reported that state de-regulation of copper-wire phone lines has led to skyrocketing price hikes for consumers. In fact, since landline prices were deregulated in 2006 by the California Public Utilities Commission (CPUC), the price of AT&T's flat-rate landline phone service increased by a whopping 115 percent. In practical terms that means Californian consumers who used to pay AT&T $10.69 per month for this service now pay $23 or more.

Even when compared to the competition, AT&T’s price hikes are extraordinarily high. According to the Chronicle, Verizon's flat-rate service climbed a mere 18 percent during the same period, while SureWest and Frontier increased charges by about 6 percent.

During the time that AT&T increased its rates, Californians’ household income dropped significantly. While the real median household income for California peaked in 2007 at $65,027, by 2011 it dropped by $7,740, reaching $57,287.[1] Californian households who saw their income shrink by 11.90 percent were confronted by AT&T landline service charges going up and up.

Since de-regulation in 2006, AT&T’s other monthly charges went up across the board. Measured service soared 222 percent - from $5.70 to $18.35, call-waiting charges rose nearly 180 percent, and anonymous call rejection service costs quadrupled.[2] According to CPUC data, AT&T’s current prices are the highest among the competing service providers of basic residential landline phone service, by anywhere from $2 to $6 per month.[3]

AT&T’s rate increases aren’t just about money. They are about fair access to basic services. While many households are now moving to wireless or internet based phone systems, landlines are still crucial to most households. Being able to use a phone in a time of emergency is not a perk, it is a life saver. In fact, during Superstorm Sandy, old-fashioned land lines were one of the few public utilities still working.

In 2006, then CPUC Commissioner Rachelle Chong argued that increased competition from Internet phone service and cell phones would keep prices low, predicting that "The market will be so competitive it will discipline prices."[4] Yet while the Chronicle’s recent report proves such predictions wrong, that hasn’t slowed down the drive to de-regulate public utilities.

CALPIRG encourages the CPUC to play a crucial role in protecting customers who use telephone services by providing needed regulatory oversight of telecommunication service providers in California. CALPIRG believes that all Californians should enjoy reliable phone service, remain protected from unreasonable charges, be able to reach 911 in an emergency, and have their complaints resolved by an agency based here in California. There are some things that are just too important to leave to the whims of the market.

 


    

[2] AT&T rates skyrocket since deregulation, James Temple, San Francisco Chronicle, January 17, 2013.

[4] AT&T rates skyrocket since deregulation, James Temple, San Francisco Chronicle, January 17, 2013.

 

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