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LOUIS HAUThe attorney general says he will appeal the vote to allow Verizon, Sprint and BellSouth their biggest hikes ever.
TALLAHASSEE - Get ready for sticker shock on your phone bill.
The Florida Public Service Commission voted 5-0 Tuesday to permit Verizon, Sprint and BellSouth to raise their residential rates for local basic service by 26 to 90 percent, the state's highest-ever phone rate hikes.
For example, Verizon customers in St. Petersburg, Tampa and Clearwater would see their local basic rate rise 38 percent over two years to $16.70 a month.
Under the plan approved by the PSC, the first installment of the increases would hit customer bills during the first quarter of next year.
But it probably won't happen that soon. Attorney General Charlie Crist and the Office of Public Counsel, the state's consumer advocate on utility issues, vowed to appeal the decision to the state Supreme Court if the PSC rejects their planned motion for reconsideration. That would prevent any rate increases until after the court rules.
"I'm disappointed," Crist said after the PSC vote. "It's unfair, but it's not the end. ... It's a heck of a Christmas present for the people of Florida."
Previously, phone companies were limited to annual rate increases of one percentage point less than the rate of inflation. Verizon, for example, has seen basic local rates go up $1.42 in 26 years.
Far bigger rate increases were made possible by new legislation crafted by major local phone companies and approved this year by the Legislature and Gov. Jeb Bush.
"The professionals at the PSC reviewed all of the information provided to them and took public input," Bush's press secretary, Alia Faraj, said after the commission's vote. "And what Floridians will see is an increase in competition and choice and innovation and benefits over time."
Supporters of the rate increases argue that higher local rates will coax competitors into offering alternatives to the big local phone companies. "We're going to be in a very tough environment very soon," predicted Alan Ciamporcero, Verizon's southeast regional president for public policy and external affairs. "This is a new world for us."
The phone rate legislation also holds out hope of lower rates for instate long-distance calls.
In exchange for the local rate increases, the phone companies must make corresponding cuts in the access fees they charge long-distance carriers for instate calls. The long-distance companies are supposed to pass those savings on to consumers, although they won't say publicly how deep or long-lasting those cuts will be.
Deputy public counsel Charlie Beck argued residential customers will lose much more than they gain."Overall, it's a big hit to residential customers," Beck said. "We're going to do everything we can to contest it."
Nor would the rate increases approved Tuesday be the end of it. After they are phased in over two to three years, the phone companies would be permitted to raise their local rates by as much as 20 percent a year without PSC approval or any further givebacks.
To cushion the effect of the rate hikes on low-income households, Verizon, Sprint and BellSouth agreed to expand eligibility for the state's Lifeline discounts on phone service to customers with household incomes at 135 percent of the federal poverty level, up from a planned 125 percent. In addition, they agreed to shield Lifeline customers from any local rate hikes for four years.
The governor's office cited the Lifeline protections as a key element of the package.
But Benjamin Ochshorn, an attorney for Florida Legal Services in Tallahassee, said even expanded Lifeline eligibility won't help the majority of low-income households. Although the phone companies said they don't expect many customers to drop phone service because of the added cost, Ochshorn countered that the companies already were cutting off service to many low-income customers because of their inability to pay their monthly bills.
One group of phone customers won't be affected by the rate increases: Prices won't change for certain calling packages offered by Verizon and BellSouth, such as those that bundle local phone service with multiple options such as voice mail and call forwarding or long distance. Sprint, which had originally planned to do the same, now expects the price of its bundled packages to go up.
In addition to the rate increases, the phone companies will sharply increase onetime charges, such as line connection fees.
While the rate hikes for local service and the reductions in the long distance companies' access fees will be permanent, the PSC voted to require long-distance companies to pass on the savings to their customers for a minimum of one year after the initial rate hikes are completed. The commission also accepted the long-distance carriers' argument that the savings should be passed on to residential and business customers in proportion to the minutes they rack up in instate long-distance calls.
Because business customers account for the majority of such calls, consumer advocates said that formula will come at the expense of residential customers.
And the residential customers will be paying 86 to 93 percent of the increases in local basic rates, the advocates added. The remainder will come from businesses with single-line phones.
Tallahassee lawyer Mike Twomey, who opposed the rate hikes on behalf of AARP and Common Cause, said "the Legislature set a solid foundation for residential customers being ripped off" by passing the new phone regulations. But he added that the PSC should have rejected the phone companies' applications because they failed to meet what he said was the statute's requirement that residential customers benefit from the rate changes.
Despite the PSC's unanimous vote to approve increases, some commissioners expressed discomfort about the effects on the poor.
Commissioner Braulio Baez, who will become PSC chairman in January, said increased competition will benefit consumers but "competition doesn't work if there's a bunch of bodies strewn in the street to get there."
- Times staff writer Lucy Morgan contributed to this report. Louis Hau can be reached at hau@sptimes.com or 813226-3404.