AT&T raises rates on features

Prices for services such as caller ID go up for the second time since state caps were lifted.

By James S. Granelli, Times Staff Writer

July 17, 2007

Los Angeles --Millions of Californians will start paying several dollars a month more for land-line phone service after AT&T's second price increase for custom-calling features since the state lifted rate caps last year.

The nation's biggest phone carrier this week boosted the cost of caller ID, call waiting and a host of other features for a la carte phone service.

The move could push many people to sign up for bundles of services, such as phone and Internet together, that could save them money overall but cause them to spend more with AT&T. Two-thirds of AT&T's customers have bundled services, which aren't subject to the rate hikes.

AT&T and other carriers want more people to sign up for bundles because those customers have proved less expensive to maintain and less likely to leave for rival companies. The price hikes could leave the phone companies vulnerable to customer defections because cable TV companies are aggressively wooing phone customers.

Verizon Communications Inc., the second-largest carrier in the state, also has been increasing rates this year for stand-alone residential, business and wholesale services. AT&T controls about 65% of the state's telephone access lines, compared with Verizon's 18%.

Phone companies say the rate increases reflect their increasing costs, which they had not been able to pass on to consumers under decades of regulated pricing.

But consumer groups complained that competition was failing to keep prices down, as promised, after the state Public Utilities Commission's decision in August to end rate regulation.

"It's open season on telephone rates, so the companies are jacking prices up," said Regina Costa, an analyst with the Utility Reform Network in San Francisco.

Since January, the phone companies' rates for certain features have soared as much as 350% for those who don't buy bundled services.

Many customers used to paying .17 for caller ID in December, who had already seen one price increase to .99 a month, will now pay . Call waiting, speed dialing and other features that cost .23 in December now run after two price hikes. An unlisted number now costs .25 a month, a 346% increase over the previous charge of 28 cents a month.

AT&T customer Carol Harvey of Walnut Creek, Calif., is upset that she has to pay more to keep her number out of phone directories.

"It's pure gravy for them," she said. "You get caller ID blocking for free because it's a privacy issue. It would seem that having an unpublished phone number is a privacy issue too."

Verizon customer Thomas Barrabee of Sunland is thinking of giving up the payment for inside wire maintenance. Once 95 cents a month, the fee rose this year to .75 from .95 a month.

"That's an awfully big jump," he said. "In the 33 years I've been here, I've only called in once to fix a line, and it was just loose."

But the higher rates could have a counterintuitive effect: Instead of driving people away, they could encourage customers to sign up for even more services.

That's because AT&T and Verizon customers who subscribe to bundles of services, such as a package with unlimited local and long-distance calling or one combining phone and Internet, aren't subject to the increases. In fact, they're getting more discounts than ever.

AT&T, for instance, has cut its lower-speed broadband Internet rate to a month — in certain cases — when bought as part of a bundle. Verizon constantly changes its bundled offers, sometimes giving more than the typical or discounts off the price of the services if they were ordered separately.

When the Public Utilities Commission ended price regulation last year, phone companies argued that competition from cable TV, cellphones and Internet calling would keep rates level or even cause them to go down.

But they are singing a different tune about the price hikes this year.

"The fact is, almost all of these charges have not been looked at in 20 years," AT&T spokesman H. Gordon Diamond said.

Said Verizon spokesman Jonathan Davies, "Prices were kept artificially low for years."

The Utility Reform Network disputed that. The public advocacy group, known as TURN, said that under past price regulations the PUC had determined that the prices reflected the carriers' true costs, and that there was no reason now to raise them.

The price increases this year show that competition is not robust enough to act as a lid on prices and that the PUC deregulated the industry prematurely, Costa said. Her group sent a letter to the agency essentially asking commissioners, as she put it, to "do their job."

But AT&T's Diamond said competition had been strong enough to take a heavy toll on the company's land-line business, which has lost 20% of its access lines in five years.

He said that TURN's challenge to the deregulation decision was dismissed two months ago by a state appeals court and that the PUC already had a proceeding underway to determine how to monitor price hikes and other phone company actions.

AT&T has about 15 million access lines to homes and businesses; Verizon has about 4 million. Both have been losing land-line customers over the last few years to cable, cellphone and Internet telephony services.

Cable companies are adding about 1 million phone customers a quarter and now have nearly 11 million phone customers nationwide, about 1 million of them in California. AT&T and Verizon, meantime, have fewer than 1 million pay TV subscribers nationwide.

Phone and cable companies both have used bundles to stay competitive. But bundled prices aren't for everyone, and customers look for ways to fight back.

Barrabee, the Sunland resident, thinks his neighbor might have had the right idea.

"She had her line taken out and now only uses a cellphone," he said.

james.granelli@latimes.com

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(INFOBOX BELOW)

Rate hikes for land lines

Here are some of AT&T's latest price increases for custom-calling features:

Old price New

Service per month price

Caller ID .99 .00

Rejection of anonymous callers 2.99 4.00

Call waiting ID, call return, three-way calling,

call forwarding services, repeat dialing,

distinctive ring, other similar services, each 3.99 5.00

USelect package of three features 12.31 13.31

USelect package of six features 20.31 21.31

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Source: AT&T