Cellular telephone carriers raise impropriety charges.

The already competitive cellular telephone market in Los Angeles County is heating up with allegations of unfair advertising, price fixing and unlevel playing fields.

Adding to the unrest is new technology that could raise new questions about whether cellular phone users are getting the best possible deals.

The California Public Utilities Commission is investigating allegations and concerns raised about cellular phone service in the area, including charges of price fixing, improper advertising and possibly unfair competitive advantages, said PUC representatives last week.

One PUC spokesman said some of the charges raise legitimate questions about the current state of the business, which for nearly a decade has been dominated by two major players.

All the issues are related to the impending entry of a new cellular phone provider -- Nextel, which will start selling car- and portable-phone service in the greater Los Angeles area in August.

For almost the last 10 years L.A. Cellular and PacTel Cellular have had the Los Angeles County market to themselves because of state and federal restrictions. Those restrictions have now been eased, allowing Nextel to move into the market where, according to an industry analyst, PacTel has a slight edge with a 53 percent market share to L.A. Cellular's 47 percent.

Most of the issues being raised pit the two established carriers against the newcomer.

For instance, Nextel does not have to get state PUC approval of the rates it charges customers because it is what is known as a private carrier as opposed to a common carrier as defined by the Federal Communications Commission. L.A. Cellular and PacTel are common carriers because they use common communication networks as opposed to private networks.

Thus, L.A. Cellular and PacTel charge that when Nextel enters the market, the three will be playing on an unlevel field because the new company will not have to get PUC approval for rates. Currently, L.A. Cellular and PacTel have to apply to the PUC for any rate changes.

Doug Dade, an analyst in the telecommunications division of the PUC, said Cellular and PacTel have a legitimate argument.

"The way it is now Nextel can set its own rates. It is something we're concerned about because it means they're playing under different rules," said Dade.

The FCC and federal lawmakers are currently studying the rates issue as it relates to new regulations that allow companies like Nextel to enter a market, said industry analyst Herschel Shosteck of Herschel Shosteck & Associates Ltd., a cellular phone industry consulting firm in Silver Spring, Md.

"What's going out there now is typical of what happens whenever someone thinks they are at a disadvantage," said Shosteck. "This is what competition is all about and, with Nextel coming out, everybody now thinks that somehow they are going to be at a disadvantage."

In the past month, first L.A. Cellular and then PacTel introduced new rate packages that offer savings of up to about 25 percent. It was the first time that either had cut rates.

Nextel has asked the PUC to investigate L.A. Cellular's new rate package, claiming that the company has not fully disclosed its intentions to the public.

"They should be completely up front with the public in telling them that this is an attempt to lock up new customers and that there is a high cancellation fee if they pull out of the deal," said Robert Foosaner, vice president of public affairs for Fleet Call Inc., the Rutherford, N.J.-based parent company of Nextel.

L.A. Cellular executives did not return a phone call for comment.

Foosaner said Fleet Call asked for the L.A. Cellular investigation before PacTel initiated its new discount rate package. He said Fleet Call is studying the PacTel package and may ask for a similar probe concerning that new rate structure.

Dade of the PUC said the issues raised by Fleet Call about the L.A. Cellular discount package, which is only in effect for 30 days, are being investigated by the state agency.

"There are some things there that do concern us but it's doubtful that the PUC will do anything that would alter the availability of these new rates," he said. Dade indicated L.A. Cellular has expressed some interest in working with the PUC on possibly changing the way the discount plan is marketed.

Before the new rate structures, the basic charge for both L.A. Cellular and PacTel customers was $45 a month plus 45 cents a minute. The average bill was $100 a month. Under the new rate plans, customers could lock in lower rates for up to a year.

Nextel has not yet announced its rates for car- or portable-phone use in Los Angeles County, which has about 700,000 cellular customers. Prior to the announcement of the new temporary rate structures, the county was one of the most expensive areas in the country for cellular telephone users, said Shosteck.

Another controversy sparked since the existing providers lowered their rates involves a charge of price fixing. California state Sen. Herschel Rosenthal, D-Los Angeles, has asked the PUC to investigate possible price fixing by cellular providers in different markets throughout the state, including Los Angeles County.

A spokeswoman for the PUC said the matter will be discussed at the next meeting of the regulatory agency's board June 23.

Meanwhile, further complicating the outlook is the arrival of new technology -- digital cellular phones, which are available but are not yet in use by either L.A. Cellular or PacTel.

Officials at the PUC are concerned that digital phone technology could reduce competition among carriers because it would require that consumers buy a new phone if they want to switch carriers.

Right now, L.A. Cellular plans on using one type of digital technology and PacTel will use another, meaning that each carrier will require a different kind of phone. Nextel will start off using only digital cellular phones.

Currently, cellular phones are interchangeable among carriers because they work on what is known as the analog system. Digital systems use numbers as opposed to the actual voices when transmitting calls. Digital systems are supposed to provide much clearer transmissions with fewer call interruptions.