In Tuesday's Business section, a telephone industry viewpoint was incorrectly attributed to Samuel A. Simon, president of the Telecommunications Research & Action Center. The phone industry has said that local service costs must rise as subsidies that came from long-distance and other services before the Bell System breakup are removed. Some telephone industry observers, such as Simon, do not espouse this position.
Since the breakup of the Bell System two years ago, consumers are paying more for telephone service with no improvement in service, according to a study released yesterday by a national consumer group.
In addition, telephone customers are bewildered about choosing long-distance service in the wake of the breakup, according to the Consumer Federation of America.
The CFA report was mirrored in comments by other consumer groups, congressmen and telephone experts. They have concluded that, for the vast majority of telephone users, lower long-distance rates that have occurred since the breakup have been only partly offset by the increases in basic local telephone service, for which rates have risen. The beneficiaries of the Bell System breakup so far have been large corporate users, they said.
"There is no question that any benefit over the last few years has been spread very unequally," Rep. Ron Wyden (D-Ore.), a member of the House Energy and Commerce Committee, said yesterday. "If you are a senior citizen, you have not enjoyed the fruits of what has happened."
Genny Morelli, deputy assistant to the general counsel of the National Association of Regulatory Utility Commissioners, said, "Basic local ratepayers haven't seen the benefits of the Bell breakup that corporate users have seen in terms of new technologies available.
"The average ratepayer doesn't need those services."
But, the United States Telephone Association, representing 1,100 phone companies, said yesterday, "Phone service still remains one of the consumer's best bargains.
"From 1967 to 1984 local rates went up 114 percent compared with a 311 percent increase in the consumer price index," said USTA President John Sodolski. "What's happening this year suggests a moderation of telephone rate increases for the near future and the feeling is that we are not going to have the huge rate increases we've had for the past five or six years."
The CFA said that, over the last two years, the nationwide average for basic, unlimited flat-rate phone service has increased 35 percent, or $3.74 a month.
The cost of flat-rate calling has gone up 69 percent in the District, 49 percent in Maryland and 43 percent in Virginia, including charges for maintenance of wiring and access to the long-distance network, according to the CFA.
At the same time, long-distance rates have dropped about 10 percent, according to the CFA.
The Federal Communications Commission said long-distance rates, excluding those for "short" long-distance intrastate calls, had dropped about 12 percent in the last two years. The FCC has no available figures for short long-distance calling.
As an example of the problems caused by higher rates, CFA points to customers such as John Meikle, a D.C. resident.
"It's almost too much for me. We make out somehow or another though," he said. "My basic rate is $18, and if it goes up more, it's going to be hard. I don't think I'd be getting my money's worth."
The breakup has not made Meikle "any better off," he said. Any drop in long-distance rates does not make a difference to Meikle. "I don't make long-distance calls; I don't care about that," he said.
But, some groups have benefitted from the breakup, according to Gene Kimmelman, legislative director for the Consumer Federation of America. He said big businesses are benefitting from the drop in long distance service, lower-priced telecommunications equipment and new data-processing services that are of little use to the average consumer.
"We are calling for Congress to step in and help redistribute the benefits of competition, make those benefits available to all consumers, not just big business," Kimmelman said.
Some members of Congress agreed.
Wyden, a member of the House Energy and Commerce Committee, said "Some ratepayers are clearly paying a whole lot more and are not enjoying the benefits, while large users are paying less. The benefits ought to be distributed to everybody, and I think it's high time Congress reasserted itself and went to bat for the ratepayer."
According to Rep. Timothy E. Wirth (D-Colo.), chairman of the House Telecommunications subcommittee, the committee will hold hearings on the ratepayers' interest early next year.
Wirth and other experts say that consumers still can save money on phone service, but "would have benefited even more if agency regulators had acted out of genuine concern for the consumer and not merely the very large user." Wirth said those who purchase their own phone, as well as choose a lower-cost long-distance service, "clearly come out ahead."
The FCC attributes much of the price increase to inflation. "In the late 1970s, we had high inflation, and it took several years to get passed through to utility rates," said Albert Halprin, chief of the FCC's common carrier bureau.
Since the breakup, local phone companies also have been moving towards "cost-based" pricing, or pricing that reflects the cost of service, said Samuel A. Simon, director of the Telecommunications & Action Center. Prior to divestiture, long-distance and other business services subsidized local service, he said.
According to the CFA report -- which relied on statistics from the FCC, state public service commissions, and the National Telecommunications Information Administration, a branch of the Commerce Department -- local telephone companies asked for $9 billion in local rate increases between Jan. 1, 1984, and Sept. 30, 1985, and received $4.7 billion in revenue increases from state regulators.
"With $2.7 billion of revenue requests currently pending, the total increase in telephone charges, including both residential and business customers, since divestiture is likely to reach $6.1 billion by Dec. 30," Kimmelman said.
The FCC said, however, that on the average, residential bills, which include local and long-distance calling and equipment, have gone up 14 percent since the breakup.
"The overall consumer price index has risen 7 percent in the same time period," said one FCC source. Increases in local service are "no big deal . . . vastly overblown," the source said.
Telephone service accounts for only 1.6 percent of consumer expenditures over a year, the source said. Moreover, "local phone companies are asking for less and getting less" from state commissions as inflation levels out, the source said.
According to David Aylward, managing partner at National Strategies and Marketing Group, a Washington consulting firm, customers who subscribe to an alternative phone service and also purchase their phone do come out ahead.
Customers have been "victimized" by the Bell breakup in only one way, he said. "The local telephone companies used the divestiture as an excuse to request massive and unjustified rate increases, which too many state public utility commissions rushed to grant without careful scrutiny.
"If state regulatory authorities are pushed to bring local rate increases under control, residential customers will come out way ahead financially from communications competition," he said.