Regulators Target Pac Bell Increases In Business Rates.

Business phone rate increases of up to 200 percent have triggered an unusual protest from state regulators and has forced Pacific Bell into a high-stakes battle over competition in the local phone service market.

The consumer advocate arm of the California Public Utilities Commission filed the protest last month against the rate increases, which took effect June 1 and are just now showing up on bills.

The hikes range anywhere from 10 percent to 200 percent for business, many of which already have been hit hard by rising electricity rates. The case is being reviewed by PUC staff members who will issue their recommendations to the five-member PUC board in the next several weeks.

Last year, the board cleared the way for Pacific Bell to raise its rates by ruling that the business local phone market was competitive. Under that ruling, the PUC board can order a telecommunications provider to rescind rate hikes only if it determines there is insufficient competition in the market.

That's what the PUC's Office of Ratepayer Advocates hopes will happen after filing its protest.

Pacific Bell is the state's largest provider of local phone service.

'This situation in no way resembles a competitive marketplace," said Regina Birdsell, director of the Office of Ratepayer Advocates. "Pacific Bell has exercised considerable market power to raise toll rates way above its costs to provide these services."

$100 million in costs cited

Birdsell added that the rate increases could cost California businesses a cumulative total of $100 million a year. It's that potential cumulative cost increase that has caught the attention of one of the five PUC commissioners.

"These charges look to me to be awfully high and we're going to look at them," said Commissioner Richard Bilas. "We're in an economic slowdown and this is not the time to impose additional costs on business."

Pacific Bell, the California subsidiary of San Antonio-based telecom colossus SBC Communications Inc., disputes the state allegations. They say that with dozens of players, the local phone market is just as competitive as any other major industry.

"Frankly, the ORA has really missed the boat when they say the market is non-competitive," said Pacific Bell spokesman John Britton. "Every single business can pick its own local phone carrier from a list of dozens of players."

So far, there has been little reaction from the business community to the rate increases, since the higher phone billp

s only recently have begun arriving. And the rate increases only apply to Pacific Bell's portion of the bill, so they may not be readily apparent to small business owners.

Small accounts not profitable

The ORA contends that Pacific Bell's control of one-third of the local phone market gives it huge sway in determining overall market conditions, especially for small business customers that tend not to be very profitable for phone companies to serve.

"Small business customers are not behaving as a competitive market, nor is Pacific Bell with its new pricing structure," said ORA senior manager Michael McNamara.

Britton said that Pacific Bell raised its rates to cover rising costs. "The average charge for a business connection is $9.80 a month, while our average costs are above that. So we lose money on the average business connection."