Money & Politics | Daily Report

The California Public Utilities Commission has failed to keep telephone rates fair and reasonable for consumers since the industry was deregulated in 2006, a new state Senate report claims.

Two phone companies – AT&T Inc. and Verizon Communications Inc. – dominate the market  with 65 percent of the state's residential landline, wireless and broadband connections as of 2008. The companies operate 85 percent of the state's residential landlines alone.

Among five major findings, the report concluded that "virtually any increase is automatically considered just and reasonable" because the PUC does little to scrutinize proposed rate hikes.

And, the report said, the PUC's consumer affairs department – which handles 100,000 complaints a year about phone companies – is more focused on closing cases than actually fixing problems. The Senate authors also worried that "no one knows what will happen to prices" when a mandatory cap ends for basic and low-income rates next year.

Finally, the PUC fails to make public rate and service information that phone customers could use to make informed decisions about carriers, and its regulators are not adequately reporting "cramming" scams in which wireless customers were billed for unauthorized services, the report said.

"The result of these policies," according to the report, "is an intentionally hands-off system that preempts protests that a rate may be unjust, unreasonable, or even discriminatory."

The PUC released a statement Monday saying "there is insufficient evidence in the report to show that the market concentration is leading to wide-scale market abuse" and that consumers have choices for their telecommunications services. CPUC Executive Director Paul Clanon added:

I am disappointed that the report focuses on only a few parts of the CPUC’s efforts to protect and help consumers instead of recognizing all of our efforts, which are substantial and only getting better.

The CPUC noted that when discussing telephone rates, the report chooses to zero in on large rate increases for add-on services that not everyone buys, such as unlisted numbers. The inflation-adjusted price of basic telephone service today is less than in 1994. Further, in inflation-adjusted dollars, rates under the CPUC’s low-income telephone program, California Lifeline, are currently lower than in 1984.     

Three of the five PUC commissioner seats will be up for confirmation this year and in 2011, according to the Senate Office of Oversight and Outcomes.