Higher phone rates could result from Senate measure

The shadow of vastly higher rates for basic phone service for millions of Americans hangs over the landmark telecommunications deregulation bill which the Senate approved this week.

And despite the Senate's overwhelming 90-to-4 approval of the bill, heated debate over its effects on the American public is already shaping up into a classic battle between consumers and industry.

The bill, which faces rougher sledding in the House than it did in the Senate , would for the first time permit the giant American Telephone and Telegraph Company (AT&T) and other companies to compete in traditionally unregulated but related fields such as data processing and telecommunications equipment. At the same time, the Bell System's so-called "subsidized" local rates -- which have been offset by long distance rates and charges on "frills" phones such as the Trimline -- would virtually end, according to both congressional experts and AT&T officials.

The prospect of higher telephone rates for basic local service also comes at a time when many of AT&T's 23 local subsidiaries such as the New York Telephone Company here have requested some of their biggest rate increases in history. New York Telephone, for example, has asked the state of New York to allow it to practically double the customer cost for phone installation.

"In the long run there's a great danger this bill could stifle competition," declares Steve Brobeck, executive director of the Consumer Federation of America , in part echoing waht US SEn. Ernest Hollings (D) of South Carolina contended at the recent Senate hearings.

Senator Hollings, along with many consumer advocates such as Ralph Nader and Mr. Brobeck, are seriously concerned that AT&T will use revenues from remaining monopolistic "regulated" phone service for the unregulated new business enterprises, thereby giving the nation's biggest company a substantially superior position in competing against other companies.

While the Senate bill says, in effect, that funds from the regulated telephone service cannot be channeled the planned subsidiary operations -- what industry analysts are already calling "Baby Bell" -- Mr. Hollings doesn't believe the legislation states this provision strongly enough.

"It's not enough to decide for regulation," says Lee Richardson, a telephone company expert with the Consumer Federation of America (CFA). "You must have restraints so that competition is indeed 'wide open.'"

For its part, CFA, which represents 240 consumer groups across the nation, is marshalling all its resources to try to ensure that the House version of the bill is more favorable to both consumers and competition.

CFA, pledging a "massive effort" to oppose the Senate-passed legislation, is asking the members of its affiliate organizations to begin contacting congressmen to oppose the House bill.

Although it is too soon to get an accurate reading on where most House members stand on the bill, US Rep. Timothy J. Worth (D) of Colorado, chairman of the subcommittee now reviewing the legislation, believes with the CFA that there must be restraints so AT&T cannot use the profits from its regulated business for its unregulated business. Then, too, since the Senate bill had the strong endorsement of the Reagan administration, the Democratically-controlled House is widely expected to give this deregulation legislation a great deal more scrutiny than the Senate did. Most close observers say House passage will not come before early next year.

Even if the final version of the House bill is akin to the Senate version, AT&T's telephone company subsidiaries cannot automatically raise rates to customers. State regulatory commissions would approve or disapprove requests by the telephone companies for rate increases as they have in the past.

But since the Senate bill would be the death-knell of the telephone company's system "subsidizing" -- as AT&T puts it -- basic local service, cost for consumers would increase, according to formulas set by the various state regulatory agencies. According to William Mullane, an AT&T spokesman in New York, the national average monthly cost of local service which currently stands at $9 would jump to $15, which AT&T claims is the actual monthly average.