California Utility Commission’s ‘Hands-Off’ Telecom Policies Hurt Consumers, Says State Senate Office
Consumer protections for California phone customers have dwindled since the Public Utilities Commission deregulated phone rates in 2006 and adopted a “hands-off” approach to telecom, the state Senate Office of Oversight and Outcomes said. In a report that consumer advocates praised, the nonpartisan office said Friday the commission “has consistently failed” to give consumers “basic information” that would arm them against fraud and encourage informed choices in picking phone carriers. State law mandates that the commission guarantee “just and reasonable” utility rates, but the regulator, “in effect, no longer tracks phone rate increases at all,” the office said. It was created in 2008 to give senators nonpartisan opinions on government performance.
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"The Senate staff investigation demonstrates beyond a shadow of a doubt that telephone deregulation has been a disaster for California phone customers,” said Mark Toney, executive director of The Utility Reform Network (TURN. “The CPUC has buried its head in the sand, rubber-stamping price hikes, failing to collect the information needed to track the effects of deregulation, and failing to provide the public with crucial information on prices and service quality and arbitrarily closing thousands of legitimate customer complaints."
Deregulation is putting basic phone service and Lifeline customers in jeopardy by taking limits off rates starting Jan. 1, 2011, Toney said. “Prices have gone up for almost everything and have doubled or tripled for critical services such as 411 directory assistance, caller ID, and unlisted numbers, and when rate caps come off at the end of the year -- the sky is the limit on increases.” He demanded that the commission freeze basic service rates at current levels.
The report focuses on the commission’s consumer protection role, encapsulated in a state mandate that all utility charges “shall be just and reasonable,” the oversight office said. “In 2006, responding to federal law and rapid changes in telecommunications, the PUC stepped away from its traditional regulatory role to let the marketplace dictate telephone prices,” the report said. “Under deregulation, the commissioners declared, the competitive market itself guarantees that phone rates are both just and reasonable. They went further than uncapping rates -- they also detached the PUC from monitoring prices."
The resulting policy “preempts protests that a rate may be unjust, unreasonable, or even discriminatory,” the report said. The commission has no formal system to document the level of competition whose presumed existence is the reason for deregulating, it said. Competition is supposed to lower prices, but utility commission data show residential phone rates rising, some by several hundred percent, the report said, citing the monthly charge for an unlisted number. “AT&T raised this rate 614 percent in the first year of deregulation -- from 14 cents to $1, the report said. “SureWest raised the rate 563 percent, from 30 cents to $1.99. Frontier increased it 99 percent, from $1 to $1.99. And Verizon upped it 25 percent, from $1 to $1.25."
The basic residential rate and the subsidized Lifeline rate for low-income Californians also have climbed gradually for two years, the report said. On Jan. 1, the price cap on those rates comes off, and consumer advocates fear prices will soar without new controls to ensure that rates remain affordable, it said.
"Though informed consumers supposedly will ‘vote with their feet’ by changing carriers if rates are high or service is bad, the PUC doesn’t provide the information that would help them decide,” the report said. The Senate office collects data such as rates that carriers charge, targets of fraud inquiries, the PUC’s own complaint statistics, telco trouble reports, but makes none of the information public, the report said. And despite years of studying cramming in the wireless sector, as ordered by the Legislature, the utility commission has not set up a system for tracking and reporting complaints, the report said.
The Public Utilities Commission on Monday expressed disappointment about the report. The analysis narrowly examined the commission’s work “instead of recognizing all of our efforts, which are substantial and only getting better,” Executive Director Paul Clanon said. Adjusted for inflation, phone service in California costs less than in 1994, the commission said. The report “ignores the broader telephone market by focusing exclusively on wireline telephone rates,” it added. Consumer Affairs Branch Director Loreen McMahon said her office has responded to about 45,000 phone calls from consumers since 2008 and thousands more contacts by e-mail and letter. “Twice the number of complaints were resolved in favor of the customer, rather than the utility,” McMahon said. Clanon said, “Protecting the interests of consumers is what we do, and we do it well and thoughtfully. We are constantly improving and refining our internal processes to give consumers the best care and assistance possible."