But the telephone carrier also will be subject to stiff penalties, such as offering a discount on ISDN-line installation, if it doesn't offer timely and reliable service, the ruling said.
The five-member California Public Utilities Commission still must approve the proposal by administrative law judge Kim Malcolm at its meeting on January 23. It is unclear how the commission will vote, but a price hike seems likely, according to observers.
The vote will end the more than year-long dispute between Pac Bell, its customers, and computer companies led by Intel, over the rates. The case has been closely watched across the country because California handles more than one-third of the nation's Internet traffic and Pac Bell has been a leader in marketing ISDN.
Late yesterday, Malcolm ruled that Pac Bell could increase its pricing in two increments: $2.50 per month pending the commission's final approval, and another $2.50 per month one year later.
Pac Bell's monthly charges for ISDN now stand at $24.50 per month for residential customers and $25.75 per month for business users. There are additional per-minute charges for business customers. Pac Bell has 110,000 ISDN users and estimates a growth rate of 4,000 new customers per month.
The roughly 20-percent increase proposed by Malcolm still is less than the 33-percent raise that Pac Bell requested effective immediately.
Pac Bell's attempt to hike rates by about $8 per month was met with fierce opposition. The Baby Bell said it needed to charge more to cover its costs. But the computer industry fought the increase saying it would stifle the growth of the Internet.
Malcolm met with Pac Bell, computer industry members, and consumer advocates last Monday to give Pac Bell one more chance to justify its cost-increase request, but the meeting didn't sway her to the 33-percent increase.
That meeting followed Malcolm's preliminary ruling last November, which concluded that Pac Bell hadn't demonstrated why it should be allowed to raise rates for ISDN connections. Her initial ruling stated that Pac Bell should retain the current rate of $24.50 per month for residents instead of $32.50. She also recommended off-peak usage at no additional charge for up to 200 hours, instead of the 20 hours proposed by Pac Bell.
Malcolm predicted her recommendation wouldn't be embraced by everyone. "It won't be perfect, and it won?t make everyone happy. It will fall somewhere in the middle," she said after the meeting last Monday.
Dhruv Khanna, the attorney for Intel and Compaq, today said that if the commission votes in favor of Malcolm's proposed rate increase, his clients won't be completely victorious. But, at least, Pac Bell won't win either.
"We are glad the phone company hasn't had its way so far with the increase," he said "The only thing that concerns me is that rates ought to go down in time, not up."
Pac Bell wouldn't comment on the recommendation until the commission votes next Wednesday.
The rest of Malcolm's original report found deficiencies in Pac Bell's ISDN customer and installation service; she proposed improvements for the service to be made by March 1997. She also recommended that Pac Bell agree to install an ISDN line within ten days or offer a discount. Those conditions remained intact in this week's proposal.