The Maryland Public Service Commission yesterday cut in half Chesapeake & Potomac Telephone Co.'s request to raise phone bills and ordered a $95-million-a-year telephone rate increase that will boost phone rates by 13 to 15 percent.
Most suburban Maryland residents will pay between $1.50 and $1.75 a month more for basic local phone service as a result of the decision and will face bigger increases if they want extra telephones or special services.
The state utility regulators rejected a request to boost the cost of a pay phone call in Maryland from 15 cents to 25 cents, ordered a freeze on the charges for the minimum-rate "economy service" and raised rates for most other residential and business services by 13 to 15 percent.
The Maryland rate rise falls midway between the 10 percent surcharge added to Virginia bills last fall and the 20 percent boost in D.C. rates scheduled to go into effect next month. C&P has asked for a 26 percent rate increase in West Virginia.
The increases in local phone bills are part of an American Telephone & Telegraph Co. strategy of shifting phone costs from long distance service, where the phone company has new competition, to local service, where there is a telephone monoply.
The decision was criticized immediately by officials of the phone company, which had asked for a $202 million raise, and the Maryland Office of People's Counsel, which had recommended an increase of $53 million.
Calling the decision "most disturbing," J. Henry Butta, C & P's vice president for Maryland, complained that "the commission has granted us less than half of what we have needed just to keep up with skyrocketing inflation.
"The fact the commission chose to disregard our testimony justifying the need for a revenue increase of over $200 million is even more disturbing and perplexing," he added.
By raising rates as much as it did, the commission failed to come to grips with changes in telephone service that will result from the split up of AT&T, countered Gregory Carmean of the Office of People's Counsel, which represents consumers in Maryland utility matters.
The Bell System contends local-use customers do not pay their own way and have to be subsidized by higher charges for long distance calls. Although the phone company has a monopoly on local service, AT&T faces increasing competition from companies such as MCI Communications in the long distance field, and therefore wants to keep those rates as low as possible.
Carmean disputed AT&T's claims, contending that data presented in the rate case show "local exchange service is basically paying its own way right now, and no increase is needed."
If regulators continue to raise rates for local service, the phone company's monopoly will make even more money after the phone company split-up, now scheduled to occur sometime in 1984.
Maryland PSC Chairman Thomas Hatem said the impending changes in the telephone business "raise hundreds of questions that remain unanswered.
"Frankly I think all of us have questions and not all of us have been able to reach agreement," Hatem said. People's Counsel attorneys said at least one of the five commission members wanted to cut the phone company's request by 75 percent, granting only the $53 million recommended by the consumer advocates.
Hatem said the commission sought to protect low-income persons from the higher phone rate by freezing the "economy rate" paid for one basic black dial phone used for limited local calls. That rate is between $3 and $5 a month, depending on where the customer lives.
The average Montgomery and Prince George's County customer pays about $12 a month for local phone service, C&P officials said. A 13 to 15 percent increase will raise that to $13.50 or $13.75 a month, plus tax.
Rates for long distance calls within Maryland also will go up by roughly 13 to 15 percent, phone company officials said, but it will take several days to determine how much charges for installation, business phones and other services will increase.
The decision for the first time permits the phone company to impose penalties on customers whose phone bill payment checks bounce.