In a move that could dramatically reshape how California businesses and residents obtain and pay for new phone services, the California Public Utilities Commission Thursday voted to deregulate most of the state’s landline phone industry.

The unanimous commission vote set out in a massive 264-page decision allows the state’s four largest wire line phone companies AT & T; (formerly SBC/Pacific Bell), Verizon, SureWest and Frontier to set market prices for most of their voice communication services, especially the increasingly popular “bundling” of services. The decision takes effect immediately.

“Today, California joins 21 states in deregulating its telecommunications market,” said Public Utilities Commission member Rachelle Chong.

Currently, many voice market competitors to these wire line phone companies including cable companies and Voice Over Internet Protocol (VoIP) providers enjoy the freedom to set their own voice services rates.

In order to protect moderate- and low-income residents from the vagaries of market competition, the commissioners did agree to freeze the base rate for residential phone service until Jan. 1, 2009 and ordered the companies to make that basic rate available as a stand-alone item. Furthermore, the carriers must provide 30 days notice to customers and the commission of any price increases among any of the offered services.

Also, the sharply reduced LifeLine rates for low-income households remain in effect pending further PUC review.

In moving to deregulate the land line phone market, the commission cited evidence of high levels of competition within the voice services industry, despite concerns to the contrary from consumer group critics of the proposal.

“The proposed decision finds that the four local telephone companies lack market power in California,” Chong said in a statement accompanying the decision. “We unshackle them from current regulatory chains and free them to price and offer new voice services. Their competitors are not bound by the same regulations, so this levels the playing field between competitors.”

Chong said that the Commission will monitor the land line carriers to make sure the pricing of services remains fair. “We will not regulate where it is not necessary, but we retain full authority to step in if we see market abuses.”