Consumer Federation of California

In August 2006, the California Public Utilities Commission voted unanimously to allow AT&T and other companies that provided local telephone service to raise prices at will.

Then-Commissioner Rachelle Chong, a Republican, credited as the driving force behind the deregulation plan, argued that growing competition from Internet phone service and cell phones would keep prices low.

"By the end of the 2010, these rate caps will no longer be necessary," Chong said when the new rules were being phased in. "The market will be so competitive it will discipline prices."

Too bad it didn’t work out that way.

Since fall 2006, AT&T’s price for flat-rate landline phone service has leaped 115 percent, from $10.69 per month to $23, according to information from the commission. The monthly price for measured service, which charges a fixed rate for a limited number of calls, has soared 222 percent – from $5.70 to $18.35.

Call-waiting charges popped almost 180 percent. Anonymous call rejection costs nearly quadrupled. Even flat-rate prices for the LifeLine Program basic service, discounted for California’s low-income households, have risen 28 percent.

AT&T’s price increases far outstripped those of its smaller landline competitors. Verizon’s flat-rate service climbed only 18 percent during that period, while SureWest and Frontier increased charges by about 6 percent.

Lower rates

That gap is due in part to the fact that AT&T started with far lower rates before deregulation, which has been attributed to its efficiencies of scale compared with rivals when rates were capped in the mid-1990s. But its prices are now the highest among the four competitors for basic residential service, by anywhere from $2 to $6 per month, according to PUC data.

The commission doesn’t break out total numbers of landlines by company, but AT&T and Verizon together controlled 97 percent of the total market, according to a 2009 report.

It’s difficult to think of other consumer goods or services that have more than doubled in price during the last six years. U.S. median household income has actually moved in the opposite direction. It stood at $50,054 in 2011, down 8.1 percent since 2007, according to the Census Bureau.

"My belief is that AT&T is essentially harvesting," said Dane Jasper, chief executive of Sonic.net, a competing broadband Internet service in Santa Rosa that tosses in domestic phone service for free. "They jack up the rate by a pretty egregious amount … because if people leave, well, where are they going? AT&T mobile phone service in at least half the cases.

"So they’re happy to have them leave or happy to have them stay," he said.

Legacy business

Maybe more so the former, though. AT&T has made it clear it wants to get out of the copper line business altogether, announcing plans in November to decommission the aging system as it builds out more profitable broadband and wireless services.

The company has asked the Federal Communications Commission to drop rules requiring it to support the legacy networks. Problem being: As of late 2009, about 24 percent of California households still relied solely on landlines.

AT&T spokesman Lane Kasselman stressed that the company’s rates are competitive with the industry, and that it offers a variety of affordable packages, including a new monthly plan for $19.99.

"Californians have more choices than ever before in communications services, and our pricing has changed to fit the marketplace," he said. "Californians have a variety of choices for telephone service including wireless and (Internet calling), but AT&T wireline service remains an affordable option with service available for less than a dollar a day – and for low-income consumers for as little a 12 cents a day."