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DEFENSIBLE PHONE RATE HIKE NEW YORK TEL NEEDS TO MODERNIZE ITS SYSTEM

NO ONE WANTS to pay higher phone bills. But it's hard to quarrel with the state Public Service Commission's approval of a rate increase expected to cost New York Telephone Co. customers $250 million a year.

That is substantially more than the $24 million increase recommended by administrative law judges. But their recommendation seemed indefensibly parsimonious, if not intentionally punitive.

New York Tel has not received a general rate increase in five years. It had requested a $964 million hike. A year ago, the PSC staff and the phone company agreed to a $445 million settlement. Even with inflation continuing, this week's approved rate hike is 40 percent below that.

The case was, to be sure, not cut and dried.

New York Tel was not helped by disclosures of lewd Florida parties for employees of a related company -- connected to allegations that the phone company paid excessive prices for goods and services.

There is also the issue raised by State
Attorney General Robert Abrams of rigorously requiring the telephone company to channel additional revenues into modernizing its phone networks, a requirement the PSC did not impose.

With upgraded systems, New York Tel could be more competitive, give better service and, in the end, enhance its prosperity. But the rate hike is not so generous as to lend itself to rigorous legal strings on using the added revenues.

Another criticism is that the rate hike hits residential customers harder than business customers. For years, however, businesses have subsidized residential callers.

The increase should help New York Tel buoy its earnings, which it complains are among the lowest for any phone company. It should bolster the firm's sagging credit rating, which raises costs of borrowing and, ultimately, costs to customers.

New Yorkers need a modern phone system, and New York Tel needs money for costs and a fair profit. For both, the increase ought to help.

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