The American public faces the prospect of billions of dollars in local telephone rate increases as phone companies attempt to shift a greater share of their costs to consumers.

American Telephone & Telegraph Co. subsidiaries alone have pending before state regulators applications for rate increases totaling more than $4 billion, of which $3.5 billion is aimed at residential subscribers.

To some extent, the rate applications reflect the approaching independence of those subsidiaries, which will lose the financial support of the Bell System following the breakup required by the AT&T antitrust case settlement. But for the most part, the rate activity stems from industry efforts begun a decade ago to restructure tariffs.

Thus, with increasing frequency, independent telephone companies as well as Bell subsidiaries are asking state regulators to authorize higher rates for local residential service. According to AT&T, the average one-line, monthly rotary phone rate will rise to $11.18 this year, up $1 from last year and up from $7.32 in 1975.

"The program may not be any bigger and the awards necessarily bigger than what they've been in the past, but what is different is where the money is being obtained," said Charles R. Jones, an AT&T assistant vice president.

Until the last two years, Jones explained, most increases were assessed to equipment and business users. "It's shifting to consumers," he added.

Meanwhile, increasing competition and dramatic shifts in the pricing of long-distance services under Federal Communications Commission direction are contributing to the transformation in the industry's traditional rate structure.

These developments, accompanied by the efforts of phone companies to shift billing systems from flat-rate monthly fees to usage-sensitive, "measured" service, have thrown state regulators into confusion.

"I don't know if we're overwhelmed, but we're certainly whelmed," said Larry J. Wallace, chairman of Indiana Public Service Commission and president of the National Association of Regulatory Utility Commissioners (NARUC). "It's frustrating because we seem to have so little control over things."

Consumers also are bewildered as they confront a host of complex, generally more costly options created by the aggressive competition in both long-distance service and among equipment manufacturers.

"The way I look at it the phone company is taking the opportunity to get as much as they can now on the backs of the consumers," said Fred Goldberg, a Washington lawyer representing the National Association of State Utility Consumer Advocates.

"There is a lot of confusion and the phone company is taking advantage of it," said Samuel Simon, executive director of the Telecommunications Research and Action Center (TRAC), a citizen group. "The local companies are confused. They no longer trust AT&T. The regulators are also confused and they don't know the right thing to do."

On the other hand, AT&T Chairman Charles Brown, while noting that it "would be helpful to somebody trying to untangle this" if phone companies slowed at least the pace of rate changes, said the "business cannot stand still.

"The facts are that costs are shifting the way the business has to run, and the shareholders need a decent return on their investment," Brown said last month. "Nobody is going to be served by postponing changes which have already been decreed. One might say these are already somewhat delayed."

While the divestiture required under the AT&T antitrust settlement has fueled little of the recent rate activity, it has spawned a new set of issues related to the fact that local phone companies will no longer have revenues from long-distance, equipment, and other services to supplement their income from providing local service.

As a result, some state regulators, such as Susan W. Leisner, a member of the Florida Public Service Commission, are warning that post-divestiture average rates of $25 to $30 per month are likely by 1986. Her estimate includes the impact of a new FCC access fee system that will add $2 a month to phone bills over the next two years to cover costs associated with certain long-distance services, and new depreciation rates on equipment that she said could add another $2 to $3 a month.

"In five to 10 years this nation might have an advanced telecommunications network which places us in the forefront of the information age," Leisner recently told a congressional subcommittee. "My concern is for the vast segment of our population that may not be able to participate in this wonderful brave new world because they simply cannot afford basic access to the telecommunications network."

AT&T officials vigorously deny that divestiture must necessarily cause higher local rates. "We have been saying for a decade that competition would force increases in local rates," Brown asserted. "But it really wasn't until the filing of the consent decree last year that this issue finally got attention."

For at least a decade, many telephone companies have sought to encourage customers to switch from flat-rate, fixed monthly service to the measured services which result in local charges based both on the number of minutes the telephone is used and whether calls are made across various zones. Usage-sensitive rates have been introduced in 42 jurisdictions.

New York City residents, for example, have long been offered a variety of calling packages that result in charges for calls based on distances, even within the city limits.

Arguments over such rate structures have raged within state regulatory commissions. Advocates of the plans, like former New York State public utility regulator and Carter administration official Alfred Kahn, say it's good for the public and a fair way to assign costs. "The measured service transition is just," as long as it is accompanied "by developing economy options for poor people," Kahn says.

Last month, the Chesapeake and Potomac Telephone Co. proposed such a system for District residents. Its plan offers five rate schedules, with the cost of the basic flat-rate unlimited service rising 105 percent to $18.06 a month.

Another option is a service with a flat $9.28 a month charge for the dial tone and $2.94 a month in calls, but with additional charges for other calls depending on time of day, location and length of the call. There is also an "economy" rate offered for $3.61 a month, a 64 percent increase, that makes charges for each call placed.

Some activists and regulators warn that despite the proposals for so-called "economy" rates, the numerous changes represent a serious threat to the traditional industry concept of "universal service," and that ultimately some subscribers will be forced to give up service.

"A phone is no different than food and shelter," said Simon of the TRAC group. "There may be a fairly high human cost that's going to have to be paid before regulators listen."