DEREGULATION MAY COST PAY-PHONE USERS MORE.

Byline: Rebecca Smith Knight-Ridder Tribune News Wire

Say goodbye to one of the last certainties of a tumultuous telephone industry: the 20-cent local pay-phone call.

Starting Oct. 7, owners of public pay phones can charge consumers whatever they want for local calls - defined as those terminating within 12 miles of the caller. Same goes for 411, or local directory assistance, calls. They must, however, continue to offer free 911 emergency service.

Industry watchers expect prices to jump - perhaps dramatically - at many of California's 280,000 pay phones. Some fear price-gouging where vendors have captive customers, such as in airports or shopping centers, as well as in poor neighborhoods.

``This will have a tremendous impact on the poor,'' said John Gamboa of the Greenlining Institute in San Francisco, a consumer advocacy group. ``Home-telephone penetration has been falling among the poor, pushing them onto coin phones. Now they'll be open prey for unscrupulous companies.''

If prices lurch upward or if service declines after Oct. 7, don't blame the California Public Utilities Commission.

It fought the order issued in September 1996 by the Federal Communications Commission that deregulates coin rates for nearly 2 million public pay phones nationwide. The 87-page FCC order implemented a congressional directive to remove barriers to ``fair compensation'' of pay-phone providers ``to promote the widespread deployment of pay-phone services to the benefit of the general public.''

It was intended to unleash competitive ingenuity and address industry complaints that owners weren't being compensated adequately for an explosion in toll-free calling and for local calls.

Though it's been an ardent free-market advocate in recent years, the state PUC joined nine other states and asked an appellate court to block the order. The states argued that the federal mandate constituted ``an unwarranted pre-emption of state authority'' and would obstruct states' efforts to defend the public interest. California particularly worried about people who rely on pay phones for basic phone service.

New York officials further cautioned that pay-phone deregulation would be met by ``extreme customer reaction and antagonism'' - in other words, phone rage. Nevertheless, an appeals court last month upheld the FCC order.

If the experience of states that already have deregulated coin calls means anything, the worst-case scenarios may not materialize.

Nebraska took the deregulatory step a decade ago and ``there was no real chaos,'' said John Burvainis, deputy director of the Nebraska Public Service Commission.

``Prices,'' Burvainis said, ``settled at 25 cents and we haven't heard `boo' about pay phones in years. The sky didn't fall in.''

Pay-phone providers haven't announced rate changes for California, but a price of 35 cents pops up frequently in industry discussions. ``Thirty-five cents seems tolerable,'' said Tracie Nutter, executive director of the California Payphone Association. ``Anything above that seems less tolerable.''

Thirty-five cents is the price that has become the norm in the four other Midwestern states that have deregulated local coin rates. Pacific Bell, which has 65 percent of California's pay-phone market with 140,000 units, says consumers want uniform pricing.