PUC Urged to Relax Grip on Car-Phone Prices : Telecommunications: Under a judge’s proposal, cellular firms would be allowed to raise rates by up to 10%--or cut prices as much as they want.

In a proposal aimed at enhancing competition and encouraging price breaks for California car-phone customers, a state hearing officer urged the Public Utilities Commission to loosen its tight grip on cellular phone prices.

The proposal would allow cellular phone companies--two of which are allowed to compete in each of the state’s major markets--to increase rates by up to 10% a year without prior PUC approval, unless there are protests. It would also let the companies cut prices as much as they want without approval.

Michael Galvin, the administrative law judge who drafted the proposal, said the commission will consider it May 11.

The commission ordered a comprehensive look at the burgeoning cellular market more than two years ago. Galvin’s proposal, which is being circulated for comment by consumer groups and the companies, represents the state’s first review of a lucrative business that started during the 1984 Olympic Games in Los Angeles. California’s cellular market is the world’s largest, with nearly half a million customers.

Under the proposal, a cellular company could file a proposed rate change of up to 10% a year with the commission and put it into effect immediately. If no protests are filed within 20 days, the new price would become permanent.

If an increase of more than 10% is proposed, however, the cellular company would have to continue to give the PUC a 30-day notice.

This notice requirement, now in place for any price change, has so far worked against competition by giving rivals ample warning of impending price changes, Galvin said.

In setting up the industry, the Federal Communications Commission awarded two competing franchises authority to build cellular radio networks within each metropolitan market but left it up to state regulators to set the rules. In California, the PUC imposed initial rates based on estimated operating costs--prices that have not been reviewed since, despite a dramatic increase in customers and growing profits of such providers as PacTel Cellular, an Irvine-based unit of Pacific Telesis.

Not surprisingly, there have been widespread complaints by car-phone customers over present cellular rates.

Moreover, companies that buy phone numbers from the network operators and resell them to the public have complained of unfair practices by PacTel Cellular and GTE Mobilnet, an affiliate of Thousand Oaks-based GTE California, which also sells service to the public.

Representatives for both firms, however, expressed pleasure that the PUC will consider reducing regulation in cellular pricing.