Potentially higher telephone rates in the District and what the D.C. Public Service Commission claims is conflicting information provided by Chesapeake & Potomac Telephone Co. and its corporate parent are the focus of a dispute between the regulators and the companies.

The dispute involves C&P's request to market a business phone system known as Centrex at a lower, competitive price and Bell Atlantic's application to the Federal Communications Commission to offer both Centrex and other forms of sophisticated telecommunications systems through a single subsidiary.

How that difference is resolved could cost District phone subscribers an additional $3 a month in new charges.

"There is a wide divergence in the information concerning the viability of Centrex in the District of Columbia . . . the wide divergence of information prevents the commission from putting faith in the representations of either C&P or Bell Atlantic," the PSC said.

Last April, C&P told the commission that Centrex business rates had to be lowered roughly 30 percent to prevent losing its largest customers -- which include the federal government -- to competitive telecommunications services. The company argued that losing major customers would cause local rates to increase. The PSC granted the reduction.

Now, the Bell Atlantic Corp. -- which is the corporate parent of C&P -- has told the FCC that the company wants permission for its operating companies -- including C&P -- to sell both Centrex equipment and other equipment that competes with Centrex. Bell Atlantic said that unless permission is granted, rates to residential and business customers could rise $36 per phone line per year.

Bell Atlantic maintains that as much as $250 million in revenue annually from the federal government could be lost to competitors who offer more sophisticated telecommunications services, which would, in turn, cause rates to other customers to rise.

Bell Atlantic fears it will lose the business equipment business from as many as 1.2 million phone lines because the federal government, which is seeking a new, complete phone system through the General Services Administration, will only accept bids from companies that can be "single-source providers" of both equipment and services, Bell Atlantic said.

The FCC has banned the Bell operating companies from selling equipment and services through the same subsidiary as part of the rules created in the aftermath of the Bell System breakup over a year ago.

"It's D.C. and its C&P's public service commission," said a Bell Atlantic spokeswoman of the disparity between its request and C&P's testimony.

C&P, on the other hand, sees no disparity at all. "We do not see any inconsistencies in the waiver request by Bell Atlantic and what we submitted to the PSC in the Centrex case," said Web Chamberlin, a spokesman for C&P.

The PSC said it was never informed during the Centrex case of a potential marketing problem that could cause Centrex service revenue to be lost despite a reduction in Centrex rates.

The marketing problem has "a major potential Centrex impact of which C&P has never advised the commission, even though in this proceeding the commission conducted an extensive investigation of Centrex service," the commission said.

The PSC has sent C&P a list of questions, including whether C&P withheld information about potential Centrex revenue losses from the commission, what potential Centrex revenue losses C&P now anticipates, how C&P proposes to deal with the losses, why C&P could not predict the losses during the case and why C&P did not tell the commission that special regulatory treatment was needed from the FCC to make the service competitive.

The question of whether Centrex service will remain competitive at all, regardless of the rates charged for the service, has been raised by industry experts and consumer advocates.

Competition has been stiff between the Centrex service C&P offers and other telecommunications technologies such as "Private Branch eXchanges" (PBXs). PBXs are telecommunications switches manufactured by companies such as Rolm Corp. that are located on customer premises and can perform services similar to Centrex but can also provide more sophisticated telecommunications services.

"We believe that that the Centrex rate stability plan adopted by the PSC will not make Centrex viable and that ratepayers will eventually be made to pay for the mistake," said D.C. People's Counsel Frederick Dorsey.