Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C, 20554
In the Matter of
Amendment of the Commission's
Rules and Policies to Increase
Subscribership and Usage of the
Public Switched Network
CC Docket No. 95-115
COMMENTS OF PACIFIC BELL AND NEVADA BELL
ON THE NOTICE OF PROPOSED RULEMAKING
LUCILLE M. MATES
JEFFREY B. THOMAS
140 New Montgomery Street, Rm. 1522A
San Francisco, California 94105
(415) 542-7661
JAMES L. WURTZ
MARGARET E. GARBER
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
(202) 383-6472
Attorneys for Pacific Bell
and Nevada Bell
Date- September 27, 1995
TABLE OF CONTENTS
SUMMARY.................................................................... ii
COMMENTS OF PACIFIC BELL AND NEVADA BELL................................... 1
I. IN ORDER TO INCREASE TELEPHONE SUBSCRIBERSHIP LEVELS,
LECs SHOULD BE FREE TO EXPERIMENT AND TO TAILOR
PROGRAMS THAT MEET THE NEEDS OF THEIR CUSTOMERS............ 1
A. Subscribership Principles.................................................................. 1
B. Subscribership Barriers And Means Of Addressing Them................ 6
C. Subscribership- Measurements.......................................................... 11
D. Consumer Awareness....................................................................... 11
II. THE COMMISSION SHOULD NOT PROHIBIT DISCONNECTION OF
LOCAL SERVICE FOR NON-PAYMENT OF INTERSTATE SERVICE....... 13
A. The Prohibition On Disconnection Would Be Contrary To The Public
Interest In Numerous Ways............................................................... 15
B. The Commission Lacks The Authority To Prohibit Disconnection
Of Local Service For Nonpayment Of Interstate Service In The
Manner Suggested............................................................................ 19
III. WE HAVE DEVELOPED NEW SERVICES FOR INCREASING
SUBSCRIBERSHIP LEVELS-, SERVICES SHOULD NOT BE
MANDATED................................................................................................. 22
A. Disconnection Related To Failure To Pay Interstate Long-Distance
Charges............................................................................................. 22
1 Call Control Services.............................................................. 22
a. Voluntary Long-Distance Blocking Services................ 22
b. Other Long-Distance Restriction Services................... 24
2. Assistance With Connection Charges And Deposits.............. 26
3. Lifeline Assistance.................................................................. 28
B. Services Targeted For Low-Income Populations That Are Highly
Mobile................................................................................................ 29
1. Voice Mail............29
2. Prepaid Debit Cards...32
3. Paging Services.......32
C. Extending Telephone Service To Unserved Areas............................ 33
1. BETRS.................................................................................... 33
2. Subscriber Loop Carrier Systems........................................... 36
3. Third-Party Fixed Cellular....................................................... 37
4. Third-Party Mobile Satellite Service........................................ 38
IV. CONCLUSION.............................................................................................. 40
SUMMARY
High levels of telephone subscribership have long been a national public policy
objective. This objective has served our nation well. Today almost 94 percent of the
households in the United States, including almost 95 percent of the households in
California, receive telephone service. We believe that we can do even better. We
recognize that the goal of the Communications Act is to make communication service
available, "so far as possible, to all the people of the United States." We are concerned that
subscribership is lower than average among certain demographic groups and in certain
geographic areas. We are taking concrete steps to address this concern.
The Commission should continue to encourage the development of measures for
increasing subscribership and should work with state commissions concerning these
measures. The Commission, however, should not mandate subscribership improvement
services or new programs. Conditions of subscribership vary widely from state to state, and
there are multiple factors that affect subscribership. For instance, in California we have a
much higher rate of immigration than in most states and, thus, language barriers are of
particular concern to us. We have established programs to address this concern.
Programs that are of highest priority in California, however, may not fit the most urgent
needs of other states, just as their programs may not fit California's needs.
Accordingly, determination of appropriate penetration levels and how to increase
penetration should reflect specific state characteristics. Therefore, any new programs
designed to increase penetration and subscribership should be managed and addressed by
state regulatory bodies.
The Commission should not mandate nationwide subscribership improvement
programs based on the perceived success of some states. For instance, the Commission is
considering whether or not to mandate a program based largely on the high penetration rate
of Pennsylvania, which prohibits disconnection of local service for nonpayment of interstate
long distance charges. More recent figures, however, show that several states have
surpassed Pennsylvania's penetration rate. The success of states fluctuates, and the
Commission should not base nationwide programs on ephemeral statistics.
The Commission should not use subscribership rates of particular states as a
justification to require programs that begin after the subscribership problem has occurred
and simply outlaw disconnection. Those programs pass the burden onto the carriers and
the general body of ratepayers. The focus should be on up-front root-cause solutions that
help customers control their calling and manage their debt and that help highly mobile
customers, so that customers' problems can be solved before they ever reach the point of
requiring disconnection. These root-cause solutions protect the customers that need help,
without jeopardizing the carriers and general ratepayers.
The California Affordability Study, jointly funded by Pacific Bell and GTE-California,
and our ongoing relationships with community leaders have enabled us to break-down
issues related to increasing subscribership in our territory into root-cause solutions. The
study found. "12% of all residential customers have had financial difficulty paying their
telephone bill: 6% at least somewhat often."' These customers could become tomorrow's
non-customers. To significantly improve subscribership levels, these "at risk" customers
must be considered in addition to non-customers. Retention of service for these customers
is a key issue.
The California Affordability Study is evidence of the importance of toll-call control to
retain customers, and we intend to offer toll blocking and other services to deal with this
customer need. These services are targeted directly at helping customers solve
subscribership problems, without creating the problems and risks of a prohibition on
iii
disconnection of local service for nonpayment of interstate service. The problems and risks
of that prohibition are substantial and numerous.
First, the prohibition would severely reduce the incentive of customers to take
advantage of toll blocking and other call-control and debt-management services. Second, if
customers do not learn to control their toll calling and to manage their toll debt, experience
shows that they ultimately will default on their local charges as well. Third, telephone
company net bad debt would increase dramatically. This raises prices for all subscribers,
potentially decreasing subscribership levels. Fourth, the increased bad debt may
discourage the continuation of LEC billing services for IXCS, which meet the desires of
many customers to have one telephone bill. Fifth, the costs to change our billing systems
and operations in order to implement this prohibition would be substantial and would reduce
our efficiency. Based on Bell of Pennsylvania's experience, we expect that there would be
substantially increased customer contact time needed to explain and implement the
prohibition. We conservatively estimate an increase of our costs of over $22 million
annually for 450 additional collection representatives. Sixth, the prohibition would frustrate
the Commission's intent that we continue to be able to disconnect interstate service for
nonpayment of interstate charges. The only way to prevent some types of interstate calls,
and intentional nonpayment and fraud related to them, is to disconnect all service. Thus,
once again, this prohibition on disconnects would increase costs for all subscribers and
ultimately could reduce subscribership.
Therefore, the Commission should not prohibit disconnection of local service for
nonpayment of interstate service. Rather than prohibiting disconnection, the Commission
should allow LECs to continue to develop innovative services that help customers control
their usage of telephone service and avoid getting into a situation where disconnection is
required. Consistent with the results of the California Affordability Study, Pacific Bell has
developed two options for blocking long-distance services, Toll Restriction and Toll
Blocking. As a general principle, in addition to controlling toll calls, Toll Restriction provides
relief in two areas:
It allows the customer an extended period of time to pay off
outstanding charges (up to six months)
It serves as a form of security, which can be used in lieu of a deposit
Toll Blocking will be available as a product for those customers who want to exercise
greater control over their telephone service, but are not delinquent in meeting our payment
requirements. Toll Blocking is proposed to be tariffed at $2 per month, with no installation
or non-recurring fees.
Pacific Bell currently provides additional services that restrict long distance and other
services. We provide Quick Dial Tone ('Warm Line") and Limited Disconnect services at no
charge. We also provide Billed Number Screening ("BNS"), which is somewhat effective in
blocking collect calls and/or calls billed to a third-party number, and Information Call
Services Blocking ("ICSB"). In addition to offering these services and screens that directly
block or restrict service, we believe that limiting customers' credit for toll services and
providing customers with early warnings if their toll service is unusually high helps some
customers control their usage and remain subscribers.
As the Commission points out, and the California Affordability Study confirms,
impermanent living situations of highly mobile customers correlate with non-subscribership.
For many of these customers, allowing discounted installation charges more than once a
year would be very helpful. Therefore, we recommend that Link Up assistance be
expanded to support unlimited installations per year. We believe that use of voice mail
boxes, prepaid long-distance cards, and paging services may help keep those with
impermanent living arrangements connected to the public switched telephone network when
typical basic service connections are impractical or unaffordable. Pacific Bell has been very
active in the use of voice mail boxes to help mobile customers obtain connectivity to
telephone service. We have a Community Service Voice Mail Program which is designed
for use by non-profit organizations.
Pacific Bell and Nevada Bell have found Basic Exchange Telecommunications Radio
Service ("BETRS") to be of assistance in extending service to previously unserved rural
areas. We also use Subscriber Loop Carrier systems. Unlike BETRS, these systems are
not used for local loop service, but are used for "loop extensions" they use radio in the
place of feeder cable internal to the carrier's network to traverse vast or rugged terrain less
expensively and with lower environmental impact than with copper or fiber cables.
In addressing subscribership issues, the Commission should keep in mind the
difference between availability and affordability. With new technologies, telephone service
could be made available everywhere, but it would be very expensive. Competition is
unlikely to bring low-priced telephone service to customers in unserved rural areas so long
as prices in served rural areas continue to be subsidized through geographic rate
averaging. Thus, any requirements or incentives to provide service in these areas would
need government funding, with reimbursement of LEC costs above those that could be
recovered from the customers.
In summary, the Commission should allow LECs to continue to develop solutions for
increasing telephone subscribership and to continue to work with state commissions on this
goal. Additional federal support would be helpful, but mandates are not needed and would
reduce the flexibility needed to develop solutions that address local problems. The best
solutions aim at the root cause of subscribership problems by helping customers to control
their calls. We are striving to increase our provision of these root-cause solutions in order
to increase telephone service subscribership.
Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of
Amendment of the Commission's
Rules and Policies to Increase
Subscribership and Usage of the
Public Switched Network
CC Docket No. 95-115
COMMENTS OF PACIFIC BELL AND NEVADA BELL
ON THE NOTICE OF PROPOSED RULEMAKING
Pacific Bell and Nevada Bell submit these Comments in response to the
Notice of Proposed Rulemaking ("NPRM") that the Commission released on July 20,
1995, in the above-captioned proceeding.
I. IN ORDER -TO INCREASE TELEPHONE SUBSCRIBERSHIP LEVELS,
LECs SHOULD BE FREE TO EXPERIMENT AND TO TAILOR PROGRAMS
THAT MEET THE NEEDS OF THEIR CUSTOMERS
A. Subscribership Principles
High levels of telephone subscribership have long been a national public
policy objective. The Commission's universal service policy is rooted in the
Communications Act of 1934, with its explicit purpose "to make available, so far as
possible, to all the people of the United States a rapid, efficient, nation-wide and
world-wide wire and radio communication service with adequate facilities at reasonable
charges....".[1] This purpose has served our nation well. Today almost 94 percent of the
households in the United States, including almost 95 percent of the households in
California and over 92 percent of the households in Nevada, receive telephone
service.[2]
Pacific Bell and Nevada Bell believe that we can do even better. We
recognize that the goal of the Communications Act is to make communication service
available, "so far as possible', to all the people of the United States."[3] We are
concerned that subscribership is lower than average among certain demographic
groups and in certain geographic areas in the territories that we serve. We are taking
concrete steps to address this concern and will describe some of those steps in these
comments.
As the Commission addresses subscribership issues, it should keep in
mind that its policies have helped achieve high subscribership levels by stressing the
Communications Act's prescription for "efficient ... communication service ... at reasonable
charges."[4] In the single-provider environment of the past, the Commission helped meet
this goal through rate-base rate-of-return regulation. For the transition to competition,
and in order to encourage LECs to be more efficient, the Commission adopted price
cap regulation. Now the Commission is preparing for streamlined regulation of LEC
services that are competitive and for non-dominant regulation of LECs facing full
---------------------------------------------------------------
1 Section 1 of the Communications Act of 1934, as amended, 47 U.S.C. ¤151.
2 "FCC Releases Telephone Subscribership Data," FCC, 1995 FCC LEXIS
5121, August 1, 1995.
3 47 U.S.C. ¤ 151 (emphasis added).
4 id
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competition.[5] The Commission has taken various steps to increase competition for
LECs in order to increase LEC efficiency and drive LEC rates toward cost.[6] Similar
steps have been taken by state commissions. Pacific Bell, for instance, will face full
competition from Competitive LECs ("CLECs") certified by the California Public Utilities
Commission, starting January 1, 1996. We have consistently supported full competition
so long as all competitors, including the LECS, are equally free of regulatory restraints.
In addressing subscribership issues, the Commission should not distort
the efficiencies and competitive market conditions that it has helped create. In the
single-provider environment of the past, implicit subsidies could be included in certain
rates in order to support lower rates for other services. With the advent of competition,
these subsidies distort markets by encouraging less efficient entrants in LEC markets
that supply subsidies and by discouraging efficient entrants in LEC markets that obtain
subsidies.
Therefore, these types of subsidies no longer work. Accordingly, to the
extent possible, a competitive market place should be depended upon to maximize
subscribership levels. Subscribership programs, when needed, should be targeted at
those with a definite need and should be compatible with market conditions.
Subscribership programs should be cost effective and competitively neutral. The most
economically efficient manner of funding government sponsored subscribership
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5 "Commission proposes LEC price cap changes to adapt to and encourage
local exchange competition," (CC Docket Nos. 94-1, 93-124, 93-197), FCC News
Release, September 14, 1995.
6 E.g., Expanded Interconnection with Local Telephone Company Facilities, CC
Docket No. 91-141, Memorandum Opinion and Order, 9 FCC Rcd 5154 (1994).
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programs is through explicit, broad-based, competitively neutral funding. Accordingly,
funding should be supplied by all competing telecommunications providers or by a
surcharge on all end users.
The Commission also should keep in mind the difference between
availability and affordability. With new technologies, telephone service could be made
available everywhere, but it would be very expensive. It is less expensive to use certain
wireless services than wireline services to reach unserved areas, but the cost is still
high. Decisions are needed concerning who will pay the extra expense of service for
people who live in rural areas - the customers themselves or society via government
programs. To the degree that LECs are mandated to increase the availability of any
type of product or service in order to increase subscribership, LECs are entitled to be
reimbursed via government funding for any incremental cost to the business (including
bad debt recovery) resulting from the mandated programs which the LECs are not able
to collect from the cost-causers.
The Commission should continue to encourage the development of
measures for increasing subscribership and should work with state commissions
concerning these measures. A federal and state forum, with open meetings of federal
and state commissioners at various locations around the country, probably would be
helpful.
The Commission, however, should not mandate subscribership
improvement services or new programs. Conditions of subscribership vary widely from
state to state, and there are multiple factors that affect subscribership. For instance, in
California we have a much higher rate of immigration than in most states and, thus,
language barriers are of particular concern to us. We have established programs to
address this concern, which we describe in the following sections of this part of our
comments. Programs that are of highest priority in California, however, may not fit the
most urgent needs of other states, just as their programs may not fit California's needs.
Accordingly, determination of appropriate penetration levels and how to
increase penetration should reflect specific state characteristics. Therefore, any new
programs designed to increase penetration and subscribership should be managed and
addressed by state regulatory bodies.
In the NPRM in this proceeding, the Commission recognizes differences
among the states. The Commission points out, 'Three states have less than 90 percent
subscribership."[7] A few states may need special attention, but the Commission should
not mandate nationwide services and programs based on these few states.
Similarly, the Commission should not mandate nationwide subscribership
improvement services and programs based on the perceived success of some states.
For instance, the Commission is considering whether or not to mandate a program
based largely on the high penetration rate of Pennsylvania, which prohibits
disconnection of local service for nonpayment of interstate long distance charges.
More recent figures, however, show that several states have surpassed Pennsylvania's
penetration rate.
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7 NPRM, para. 1. Based on the November 1994 penetration rates available at
the time, the three states were Mississippi, New Mexico, and South Carolina. In the
March 1995 penetration rates that were issued August 1, 1995, New Mexico rose
above 90 percent, but Arkansas fell below 90 percent.
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The success of states fluctuates. The Commission should not base
nationwide programs on ephemeral statistics.
The Commission also should not use subscribership rates of particular
states as a justification to require programs that begin after the subscribership problem
has occurred and simply outlaw disconnection. Those programs pass the burden onto
the carriers and the general body of ratepayers. The focus should be on up-front
root-cause solutions that help customers control their calling and manage their debt and
that help highly mobile customers, so that customers' problems can be solved before
they ever reach the point of requiring disconnection. These root-cause solutions
protect the customers that need help, without jeopardizing the carriers and general
ratepayers.
The development of root-cause solutions involves factors affecting
subscribership that vary among the states and are numerous and complex. The states
and LECs need the flexibility to experiment regarding how best to address barriers to
subscribership within their territories.
B. Subscribership Barriers And Means Of Addressing Them [8]
We are concerned about barriers to subscribership. Subscribership levels
are the result of multiple factors, including:
* Ability to pay
* Installation charges
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8 The Commission requests comments on subscribership barriers at NPRM
para. 44.
---------------------------------------------------------------------
* Toll charges
* Mobility
* Availability of network facilities
* Availability of substitute facilities
* Immigration rates - English as a second language
* Personal preferences
California has one of the nation's most aggressive programs to ensure
that everyone who wants local telephone service ran afford ft. The Moore Universal
Telephone Service Act of 1984 established a lifeline telephone program which offered
the lowest-cost service in the nation, which is now funded by a surcharge on nearly all
intrastate end-user services. Other states and the FCC developed similar programs.
Over 20 percent of Pacific Bell's residential customers now benefit from California's
Universal Lifeline Telephone Service ("ULTS"), and almost 95 percent of California
residences have telephone service. We are concerned, however, about those
California residents who do not have telephone service and want it. We are actively
addressing this concern.
The California Affordability Study, jointly funded by Pacific Bell and
GTE-California, [9] and our ongoing relationships with community leaders enabled us to
break-down issues related to increasing subscribership in our territory. The perception
of non-customers as never having had service and not knowing how to get service was
not supported by the study. One of the key findings was, "Most (65%) non-customers
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9 "Affordability of Telephone Service - A Survey of Customers and
Non-Customers," conducted by Field Research Corporation, 1993, vol. 1, at S-7
("California Affordability Study"). This study was mandated by the California Public
Utilities Commission.
---------------------------------------------------------------------
have had telephone service and most of this group has had it relatively recently
Non-customers generally know how to get telephone service, are comfortable ordering
service, and know that service representatives are available that speak languages other
than English.
The study found, "12% of all residential customers have had financial
difficulty paying their telephone bill: 6% at least 'somewhat often.'"[11] These customers
could become tomorrow's non-customers. To significantly improve subscribership
levels, these "at risk" customers must be considered in addition to non-customers.
Retention of service for these customers is a key issue. Fortunately, they generally
want to better control their monthly telephone bills, and we want to help them.
The Affordability Study provided us with new insights concerning
subscribership barriers related to both non-customers and "at risk" customers. Working
with community groups, we have taken these insights and broken customer-retention
barriers into types and have developed potential solutions for each type. Types of
barriers and potential solutions are as follows:
1 .MOBILITY (MOVE FREQUENTLY)"
Factors
· Renters
· Economic/jobs
Pacific Bell Potential Solutions
Installation charge
(installment payment plan over 3 months)
Reduced installation rates - Lifeline
($10. 00)
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10. Id at Volume 1, p. S-7.
11. Id. at Volume 2, P. S-1.
12. See id. at Volume 1, pp. S-2, S-20; Volume 2, p. S-5.
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Payment arrangements
(tailored to customer circumstances)
Quick dial tone
(e.g., emergency 911 access)
2. CALL CONTROL (DIFFICULTY CONTROLLING PHONE
USAGE) [13]
Factors
* Long distance charges
* Multiple family households
Pacific Bell Potential Solutions
* Toll restriction/toll blocking
* Prepaid cards
(prepaid toll and long distance)
* Improved customer management processes
(early warning of excessive charges)
* Quick dial tone
(e.g., emergency 911 access)
3. DEBT MANAGEMENT SKILLS [14]
Factors
* Ineffective debt management skills
* Debt structure confusion
Pacific Bell Potential Solutions
* Payment arrangements
* Toll restriction
* Prepaid cards
* Improved customer management processes
(early warning of excessive charges)
We discuss details of many of these potential solutions to subscribership barriers below
in Part III of these comments.
Subscribership barriers are created by complex factors dealing with
poverty, immigration, education, and culture, In an effort to ensure that essential
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13 See id. at Volume 1, pp. S-7, S-23; Volume 2, p. S-9.
14 See id. at Volume 2, p. S-15.
---------------------------------------------------------------------
services are affordable and available to everyone, Pacific Bell has joined with
community groups to address the problems. As part of this effort, Pacific Bell is
committed to using its best efforts to increase telephone penetration rates, with a goal
of achieving 95 percent telephone penetration within five years for Hispanics, Asian
Americans, and African Americans.
We believe that attainment of the 95 percent penetration goal will require
that steps be taken to achieve the following objectives-.
Competition needs to be fostered in the long-distance market.
Lower long-distance rates, to which Pacific Bell has committed
once it is allowed to provide long-distance service in California,
should make it easier for customers to control their phone bills,
avoid undesired service disconnections, and better manage their
discretionary income.
IXCs need to develop and market products and services that will
enable their customers to better control their long-distance phone
bills, thereby avoiding undesired service disconnections.
Consistent with current thinking in ongoing California P.U.C.
proceedings, all companies that will provide local telephone service
in Pacific Bell's local service territory should strive to attain these
high rates of penetration among these groups of residents.15
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15 In a draft California P.U.C. Decision, the Administrative Law Judge has
concluded that competitive LECs "should be required to include in their annual reports
their efforts to attain universal service for non English speaking and low income people
in the communities that the CLCs serve, similar to what the Commission directed
Pacific and GTEC to do in D.94-09-065." Rulemaking and Investigation on the
Commission's Own Motion into Universal Service and to Comply with the Mandates of
Assembly Bill 3643, R.95-01-020, 1.95-01-021, Draft A.L.J. Decision, July 19, 1995.
Conclusion of Law no. 39, p. 87.
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C. Subscribership Measurements [16]
We believe that the Census Bureau's Current Population Survey ("CPS")
is the best available source of data for use in subscribership measurement. Pacific Bell
uses those data to measure telephone penetration levels in at-risk communities. To
accomplish this task, we track telephone penetration rate estimates in all segments,
including - lower-income households (i.&, households with income less than $20,000)
based on ethnicity. It may be useful for the Census Bureau to ask customers who
indicate that they do not have telephone service whether or not they subscribe to
alternatives to regular telephone service, including paging service, voice mail service, or
answering bureaus.[17] We discuss the paging and voice mail alternatives below in
Part III Section B concerning services for highly mobile customers.
D. Consumer Awareness [18]
We are committed to lessening the effect on subscribership levels that
may be caused by language barriers. Pacific Bell, with the assistance of community
groups, started providing services in languages other than English ten years ago, and
we are the largest provider of multi-lingual services in California, perhaps the nation.
Each year, we receive over 6 million calls to our business offices from customers who
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16 The Commission requests comments on subscribership measurement at
NPRM, para. 45.
17 These services can be used in conjunction with payphones, without
subscribing to wireless service.
18 The Commission requests comments on consumer awareness at NPRM
paras. 46-52.
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speak Spanish, Chinese, Korean, Tagalog, and Vietnamese. Written materials are
available in these five languages, in addition to English.
In addition to ensuring that our customers can communicate with us, we
are taking special efforts to ensure that eligible households know about our lifeline
service. Accordingly, we have the following Universal Lifeline Telephone Service
("ULTS") Marketing Plans-,
One-Year and Two-Year Hispanic ULTS Marketing Plan to promote
ULTS to Spanish-speaking Hispanics within our service territory.
Our plan includes extensive use of mass media advertising and
community-based outreach.
One-Year and Two-Year Asian ULTS Marketing Plan to promote
ULTS to non-English-speaking Chinese, Vietnamese, Koreans,
Japanese, and Filipinos. Our plan utilizes mass media advertising
and community-based outreach to reach the Chinese and
Vietnamese communities, while we focus solely on
community-based outreach to reach the Korean, Japanese, and
Filipino markets,
One-Year and Two-Year African-American ULTS Marketing Plan to
promote ULTS to low income African-Americans living in California.
Our plan utilizes mass media advertising and community-based
outreach to reach this market segment.
One-Year and Two-Year General/Mandated ULTS Marketing Plan
designed to comply with regulatory requirements and to increase
awareness of ULTS among those persons who are not specifically
targeted in our other One-Year and Two-Year ULTS Marketing
Plans set forth above. Our marketing activity in this plan is entirely
mass media, consisting of the use of direct mail (bill inserts), public
displays (posters and brochures), and a toll-free ULTS 800
number.
Five-Year ULTS Marketing Plan (i&, for 1998) to continue to
promote ULTS to Spanish-speaking Hispanics,
non-English-speaking Asians, African-Americans, Seniors, as well
as all other residence customers and non-customers. We may also
develop other targeted ULTS marketing plans if the need arises.
We will continue to utilize mass media advertising (including TV,
radio, print, and outdoor advertising) and community-based
outreach throughout this period.
In addition to our ULTS marketing plans, California's streamlined
certification procedures to determine eligibility for ULTS assistance also encourage
eligible persons to avail themselves of existing programs. This simplified process is
particularly helpful to persons7 facing language barriers. Under California procedures,
persons fill out and sign a simple form concerning their income eligibility. No other
certification is required as part of the application process. Our lifeline program is further
discussed below in Part III.
II. THE COMMISSION SHOULD NOT PROHIBIT DISCONNECTION OF LOCAL
SERVICE FOR NON-PAYMENT OF INTERSTATE SERVICE
In order to "keep low-income subscribers from being disconnected from
local service," the Commission is considering whether or not to require all LECs to offer
interstate long-distance blocking services at reasonable rates.19 Alternatively, in order
to meet this same goal the Commission seeks comment on prohibiting any common
carrier from- interrupting or disconnecting local exchange service for failure to pay
interstate long-distance charges.[20]
As discussed below in Part III, Pacific Bell expects to offer blocking
services soon that cover not only interstate toll but also intrastate toll, and Nevada Bell
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19 NPRM, para. 7.
20 Id.
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currently offers these services. Therefore, if the Commission were to require long
distance blocking services we most likely already would meet the requirement.
Nonetheless, the Commission should not mandate these services. LECs need the
flexibility to develop services that will help increase subscribership in ways that meet
the needs of customers in their service territories. What meets these needs in
California or Nevada is not necessarily what meets the needs in all the other states.
State commissions are in the best position to work with LECs on services and programs
that meet local needs.
In particular, the Commission should not adopt the suggested disconnect
prohibition. We discuss the numerous problems with this suggestion below in
Sections A and B of this part of our comments. If, contrary to our recommendations,
the Commission requires any interstate toll blocking service or prohibition on
disconnects, the Commission should clearly limit the requirement to residential service.
Low-income residential subscribers are clearly the Commission's concern in this area.[21]
As discussed below in Section B, even with this limitation the suggested disconnect
prohibition would be overbroad because it would affect all residential customers, rather
than just low-income customers.
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21 NPRM, paras. 7, 16, 19, 11. We offer Toll Restriction, Toll Blocking, and
Limited Disconnect to both residential and small business customers. We should
remain free to develop call control services for whatever customer segments we believe
will benefit from them. The Commission should limit any requirements, however, to its
area of most concern, residential customers, and we believe that even those
requirements would restrict our flexibility to meet customer needs and be contrary to the
public interest.
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A. The Prohibition On Disconnection Would Be Contrary To The Public
Interest In Numerous Ways
The Commission should not prohibit disconnection of local service for
nonpayment of interstate service. Two pieces of perceived "evidence" have led the
Commission to consider this alternative and neither justifies this drastic step.
The Commission states that the first piece of evidence is "empirical
evidence that prohibiting disconnection of local service for nonpayment of toll charges
increases telephone subscribership."[22] That supposed evidence is that "Pennsylvania,
one of the first jurisdictions to take such action, has the highest subscribership rate
among the 50 states and the District of Columbia, up from eighth a decade ago." [23] The
Commission also asserts that other states with the same prohibition have
subscribership levels above the national average.[24]
The Commission based its empirical findings on the November 1994
penetration rates then available. The March 1995 penetration rates, released by the
Commission on August 1, 1995, show that Pennsylvania is no longer the subscribership
leader. In fact, six other states now have surpassed Pennsylvania's penetration rates,
sending it back to nearly the ranking that it held a decade ago.[25] This change points
out the need to avoid specific regulatory prescriptions based on fluctuating statistics.
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22 Id. at para. 30.
23 Id.
24 Id. at para. 1 1. The Commission at n. 12 lists Nevada as one of the states, but
Nevada has never had this prohibition.
25 The six states are Utah (98 percent), Wisconsin (98 percent), Nebraska (97.2
percent), Colorado (96.9 percent), Virginia (96.9 percent), and Minnesota (96.8
percent).
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Even if Pennsylvania were still number one among the states, it could not
reasonably be concluded that the prohibition on disconnects was the sole reason for
that, or that mandating prohibitions in other states would cause a similar result. Barriers
to subscribership are complex and numerous, and drastic steps should not be taken
based on so little evidence.
The Commission states that the second piece of evidence in favor of a
disconnect prohibition is "strong survey evidence that the single most significant cause
of non-subscribership is disconnection of subscribers because of inability to control toll
call usage."[26] We agree that this is one important factor, but that does not mean that
the Commission should proscribe disconnects. The California Affordability Study is
evidence of the importance of toll-call control to retain subscribers, and we intend to
offer toll blocking and other services to deal with this customer need. These services
are targeted directly at the problem and help customers deal with it, without creating the
problems and risks of a blanket prohibition on disconnection of local service. The
problems and risks of that prohibition are substantial and numerous.
First, the prohibition would severely reduce the incentive of customers to
take advantage of toll blocking and other call-control and debt-management services.
Government protection would replace assisted self-help services.
Second, if customers do not learn to control their toll calling and to
manage their toll debt, experience shows that they ultimately will default on their local
charges as well. The prohibition on disconnect for nonpayment of interstate charges
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26 NPRM, para. 30.
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would merely prolong the inevitable and leave the customer deeper in debt and less
able to get back on the network.
Third, telephone company net bad debt would increase dramatically. We
understand that the percentage of bad debt has multiplied in states that have
implemented this prohibition. This raises prices for all subscribers, potentially
decreasing subscribership levels. Based on discussions with IXCs and other carriers,
we conservatively estimate a $75 million increase in IXC net bad debt associated with
Pacific Bell's billing services. Magnified across the nation, this would be a huge
increase in bad debt.
Fourth, the increased bad debt may discourage the continuation of LEC
billing services for IXCS. These billing services meet customer needs. End users
continually have indicated that they prefer a single bill. Thus, the suggested prohibition
could frustrate continued fulfillment of the desires of the very people that the
Commission is trying to help.
Fifth, the costs to change our billing systems and operations in order to
implement this prohibition would be substantial and would reduce our efficiency. Our
billing systems and operations do not currently distinguish between types of traffic in
ways that would allow this prohibition. We cannot accurately predict our expenses
because we do not know what the specific requirements related to this prohibition
would be. For instance, when we receive a partial payment from a customer, we are
not sure to what services the partial payment would be allocated in order to determine
whether the partial nonpayment applied to local service, intrastate toll, or interstate toll.
As a result, if the Commission decides to propose this prohibition (contrary to our
recommendation), it should give parties notice of the specific details of its proposal so
that we and other parties may consider and comment on it.
Upgrading our billing and collection systems would cost millions of dollars.
In addition, based on Bell of Pennsylvania's experience, we expect that there would be
substantially increased customer contact time needed to explain and implement the
prohibition. We conservatively estimate an increase of our costs of over $22 million
annually for 450 additional collection representatives. This increased customer contact
time could place us at a competitive disadvantage vis-a-vis our competitors who might
not face these requirements.
Sixth, the prohibition would frustrate the Commission's intent that we
continue to be able to disconnect interstate service for nonpayment of interstate
charges, [27] and intentional nonpayment and fraud would increase. In the past, when the
Commission deferred to the states concerning disconnection for nonpayment, the
Commission found that "disconnection of interstate service without simultaneously
disconnecting local service is infeasible in most instances."[28] In certain important ways,
this is still true. If we disconnect interstate service but leave local service connected,
we will in effect be limited to toll restriction and blocking services. We will not have the
fall-back option of disconnection, as a last resort for dealing with customers. We can
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27 Id.. at paras. 29, 31.
28 The Public Service Commission of Maryland and Maryland People's Counsel
Applications for Review of a Memorandum Opinion and Order By the Chief, Common
Carrier Bureau Denying The Public Service Commission of Maryland Petition for
Declaratocy Ruling Regarding Billing and Collection Services, FCC 89-120,
Memorandum Opinion and Order, 4 FCC Rcd 4000, para. 47 (1989), citing the
Detariffing Order, 102 FCC 2d at 1166-1167, para. 28.
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technologically block direct-dialed originating interstate calls, but we cannot use
technology to selectively block interstate terminating calls that may be charged to the
terminating customer, including collect calls and interstate bill-to-third number calls. We
also cannot use technology to selectively block calls to 800 information calling services
or to selectively block access to the IXC 800 call completion platform. We could
attempt to rely on operators to check Line Identification Database ("LIDB") systems to
block these calls, but IXCs do not validate all calls through LIDB, permitting calls to get
through that may never be paid for. The large number of IXCs that customers can
access and transfer among would increase the opportunities for intentional nonpayment
and fraudulent use of the telephone networks.[29] Again, this would increase costs for all
subscribers and ultimately could reduce subscribership.
B. The Commission Lacks The Authority To Prohibit
Disconnection Of Local Service For Nonpayment Of
Interstate Service In The Manner Suggested [30]
Prohibiting common carriers from interrupting or disconnecting a
telephone subscriber's primary local exchange service for failure to pay interstate
long-distance charges, as suggested by the Commission, [31] would exceed the
Commission's authority. The Commission's authority is limited to interstate service, and
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29 Telecommunications Advisors, Inc. forecasted 1995 toll fraud losses at $5
billion to $8 billion. 'Telecom & Network Security Review," April 1995. Prohibiting
denial of local service for nonpayment of interstate long distance charges would greatly
exacerbate this already substantial industry problem.
30 The Commission requests comments on its legal authority at NPRM para. 53.
31 NPRM, para. 31.
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the Communications Act expressly reserves authority over intrastate service to the
states.[32]
The Commission is correct that basic telephone service, including dialtone
capability, has both interstate and intrastate components. The Commission's authority,
however, is limited to the interstate components. The Commission would be regulating
the intrastate components, not the interstate components, if it prohibited disconnection
of intrastate service for nonpayment of interstate charges in the manner suggested.
The Commission does not intend to adopt regulations concerning the interstate
components since it "would not prohibit carriers from interrupting interstate
long-distance service for nonpayment of interstate long-distance charges."[33] This
decision concerning interstate service is as far as the Commission can go in this area.
Once the Commission's interstate interest is satisfied, it has no basis to regulate further
and preempt the states' authority over local service disconnection. This is not a case of
a LEC disconnecting local service without having the right to disconnect interstate
service. Moreover, as discussed above in Section A, the only effective way to fully
interrupt interstate long-distance service for customers who are unwilling to have it
interrupted acceptance of interstate collect calls and acceptance of bill-to-third
number calls) is to disconnect all service.
In addition, the Commission's authority over interstate billing does not
provide the Commission with authority concerning the disconnection of local service.
Interstate billing is "incidental" to interstate service, not to local service. Moreover, the
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32 47 U.S.C. ¤ 152(b).
33 NPRM, para. 31.
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Commission's Title I authority to carry out the Communications Act's universal service
objective does not provide the Commission with any independent authority not provided
by other Titles of the Act.[34]
The suggested prohibition also would be an unnecessary infringement of
state authority and arbitrary and capricious because it is an overbroad means for the
Commission to attempt to carry out its express goal "[t]o keep low-income subscribers
from being disconnected from local service...."[35] Even if ft were limited to residential
customers, the disconnection prohibition would pertain to all residential subscribers, not
just low-income subscribers, and would include anyone who chose not to pay for
whatever reason, including fraud. Voluntary toll restriction services, which the
Commission recognizes are an alternative to the disconnection prohibition, [36] can be
tariffed at the state level to help those customers that the Commission is concerned
about. This approach avoids the jurisdictional conflict and avoids helping those who do
not need assistance and who are unwilling to pay for service.
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34 "Title I is not an independent source of regulatory authority, rather it confers
on the FCC only such power as is ancillary to the Commission's specific statutory
responsibilities." California v. FCC, 905 F.2d 1217, 1241 n.35 (9th Cir. 1990).
35 NPRM, para. 7.
36 Id.
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III. WE HAVE DEVELOPED NEW SERVICES FOR INCREASING
.SUBSCRIBERSHIP LEVELS: SERVICES SHOULD NOT BE MANDATED [37]
A. Disconnection Related To Failure To Pay Interstate
Long-Distance Charges
1. Call Control Services
Rather than prohibiting disconnection of local service for failure to pay
interstate charges, the Commission should allow LECs to continue to develop
innovative services that help customers control their usage of telephone service and
avoid getting into a situation where disconnection is required. The LECs and state
commissions need the flexibility to deal with the particular problems in their states, and
a federal mandate would be counterproductive.
a. Voluntary Long-Distance Blocking Services
Consistent with the results of the California Affordability Study, Pacific Bell
has developed two options for blocking long-distance services, Toll Restriction and Toll
Blocking, which are designed to address the needs of residential and small business
customers.[38] We have completed a market trial for these services and have filed an
Advice Letter at the California P.U.C. asking for approval to offer them.
We will offer Toll Restriction at no charge, in order to assist customers
who are struggling to meet their payment obligations. The use of Toll Restriction is
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37 The Commission requests comments on these types of services at NPRM
paras. 10-41.
38 Nevada Bell currently offers Call Restriction to customers under the same
terms as Pacific Bell's Call Blocking.
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applicable for 1) existing customers who are in jeopardy of having their service
temporarily disconnected, 2) customers who already have been temporarily
disconnected and wish to restore service, and 3) customers who have been
disconnected, owe a final bill, and want to re-establish service.
As a general principle, Toll Restriction provides relief in two areas-
It allows the customer an extended period of time to pay off
outstanding charges (up to six months)
It serves as a form of security, which can be used in lieu of a
deposit
Since Toll Restriction has several technological limitations which prevent us from totally
blocking all billable calls, customers need to qualify for this service as a collection tool.
An announcement is activated when a billable call is dialed from a Toll Restricted line
which advises the caller, 'We're sorry, the number you are calling cannot be completed
from this telephone, at the customer's request."
We allow customers up to 6 months to pay off their delinquent charges, as
well as all current charges. Toll Restriction serves as security on the account, in lieu of
a deposit. Therefore, in order for the customer to avoid paying a deposit, the service
must remain on Toll Restriction for six months, even if the customer satisfies his or her
debt earlier.[39] After customers satisfy their financial obligations and the 6 months have
expired, we will provide the option of restoring to full service or retaining limited service
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39 The customer can obtain full network access at any time by paying 1) all
outstanding charges, and 2) a deposit equal to twice the customer's average bill for the
past three months (on the customer's full service account), which we hold for one year
and on which we pay 7 percent simple interest.
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by purchasing Toll Blocking. A prepaid calling card could enable toll calls to be made
while either Toll Restriction or Toll Blocking is in place.
Toll Blocking will be available as a product for those customers who want
to exercise greater control over their telephone service, but are not delinquent in
meeting our payment requirements. Toll Blocking is proposed to be tariffed at $2 per
month, with no installation or non-recurring fees.[40]
b. Other Long-Distance Restriction Services
Pacific Bell currently provides additional services that restrict long
distance and other services. We provide Quick Dial Tone ("Warm Line") and Limited
Disconnect services at no charge.
Quick Dial Tone provides residential customers a set of basic calling
capabilities prior to a formal service request from the customer. Outgoing calls are
allowed only to 611 (repair), 9-1-1 (emergency), and 800 numbers to our business
offices. Other than emergency services, incoming calls are restricted until telephone
service has been established.
Limited Disconnect allows residential and small business customers who
have been temporarily disconnected for nonpayment to access 611 (repair), 9-1-1
(emergency), and 800 numbers to our business offices. Access to other outgoing calls
is restricted, and no incoming calls are allowed. Service generally remains in this status
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40 Toll Blocking provides the customer with more options than Toll Restriction;
i.e., the ability to retain a LEC calling card, to accept collect calls, or to accept
bill-to-third number calls.
---------------------------------------------------------------------
for seven days, after which ft is either restored when the customer satisfies the payment
obligation, or disconnected and the account is closed out.
Pacific Bell and Nevada Bell also provide Billed Number Screening
("BNS"), which is somewhat effective in blocking collect calls and/or calls billed to a
third-party number. BNS is voluntary; we suggest it to customers who appear to be
experiencing problems with these types of calls. The problems may be related to our
customers' inability to pay or to third-party fraud. BNS screens both collect and
bill-to-third number calls at two computerized levels. Depending on where calls
originate, however, they may bypass both screening levels. The customers are
responsible to pay for collect calls they accept, and if they are charged for a bill-to-third
number call we will investigate it in the normal manner.
We also provide Information Call Services Blocking ("ICSB"). This service
allows Pacific Bell and Nevada Bell customers to block directly-dialed calls from their
telephones to the following:
All California and Nevada 976 numbers within California and
Nevada
All Pacific Bell and Nevada Bell California and Nevada 900
numbers
All Interexchange Carrier 900 numbers
ICSS provides another opportunity for customers to control their costs. States
developed this service first, and the Commission adopted the same rules for the
interstate jurisdiction.
In addition to offering these services and screens that directly block or
restrict service, we believe that limiting customers' credit for toll services and providing
customers with early warnings if their toll service is unusually high helps some
customers control their usage and remain subscribers. These warnings also help avoid
customer confusion. They help make it clear to customers that our bills need to be paid
in full, unlike credit card bills where partial payments are accepted with interest charged
on the balance.
In July. Pacific Bell filed tariff revisions with the California P.U.C. that will
allow earlier notification to customers with unusually high toll levels, together with
requests for payment within seven days. The dollar amounts of toll service which may
trigger these special notifications and bills depend on how the customer's account is
classified as to credit (above average risk, average risk, below average risk, or
unknown).
Pacific Bell also is investigating potential spending limit products which
may allow customers to preset and modify the amount of money they can spend on toll
calls. These products, however, would require further development of AIN or other
technologies, and we cannot predict at this time the costs or potential timing for these
products. We need the flexibility to continue to explore these and other types of service
offerings.
2. Assistance With Connection Charges And Deposits
We described above the substantial assistance with connection charges
and deposits that we provide in association with Toll Restriction Service. In addition,
under California's Universal Lifeline Telephone Service ("ULTS"), [41] lower-income
customers are charged a $10.00 connection fee, rather than the normal $34.75
connection fee. This is a once a year allowance. Moreover, customers without
payment problems can spread their connection charges over three installment
payments.
No federal programs should be mandated concerning connection charges
and deposits. The Commission should support, however, the broadening of Link Up
funding to cover an unlimited number of interconnections per year. Moreover, state
lifeline programs, such as that in California, that do not require verification of customers'
eligibility should qualify for Link Up interconnection support without additional
requirements and limitations.[42] The California program has been very successful. It
ensures broad coverage of those in need, while avoiding substantial administrative
costs of verifying customers' incomes.
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41 Nevada Bell offers Universal Lifeline Telephone Service, which discounts
installation and basic monthly rates and reduces the end user subscriber line charge.
42 The Commission's rules currently contain income verification requirements for
lifeline connection assistance unless additional requirements are met, including that a
residential subscriber "must have lived at an address where there has been no
telephone service for at least three months immediately prior to the date that the
assistance ... is requested from the telephone company...." 47 C. F. R. ¤ 36.711(c)(1).
This additional non-income eligibility requirement is incompatible with the successful
California ULTS program, and thus the income verification requirement prevents
California from being eligible for Link Up.
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3. Lifeline Assistance
Lifeline assistance is properly targeted where it is most needed - to
support lower-income residential customers. As discussed above concerning
installation fees, we believe that verification of customers' incomes should not be
required in order to be eligible for assistance.
We do not believe that at this time lifeline assistance should be expanded
to additional types of customers, including schools and libraries. If lifeline is expanded
to include them, however, federal funding must be provided to cover the expense.
We believe that other programs can better deal with the needs of schools
and libraries. For instance, Pacific Bell is offering an Education First Program, which
wires schools and libraries free for one year with lines to ensure connectivity to the
public switched network.
Inclusion of schools and libraries in the federal lifeline program would
raise a number of issues. For instance, will both public and private schools and
libraries be included? Will the program be limited to K-12 or also include colleges? Will
this assistance include a phone line in every classroom? Will the assistance also
include the additional expense associated with maintaining phone lines? Who is
responsible for the CPE needed for receiving service? Are there additional community
organizations that should be included in this type of offering? We believe that these
and other issues can be better addressed by carriers working with state authorities
which can assess local needs.
B. Services Targeted For Low-Income Populations That Are Highly
Mobile
As the Commission points out, and the California Affordability Study
confirms, impermanent living situations of highly mobile customers correlate with
non-subscribership.[43] Installation charges are one barrier to subscribership by highly
mobile customers, and in California we have taken steps to reduce and spread out
these charges, as described above in Section A. For many of these customers,
allowing discounted installation charges more than once a year would be very helpful.
Therefore, we recommend that Link Up assistance be expanded to support unlimited
installations per year.
Also of help to these customers are improved customer credit processes,
payment arrangements, and the Quick Dial Tone Service described above. In addition,
we believe that use of voice mail boxes. prepaid long-distance cards, and paging
services may help keep those with non-permanent living arrangements connected to
the public switched telephone network when typical basic service connections are
impractical or unaffordable.
1. Voice Mail
Pacific Bell has been very active in the use of voice mail boxes to help
mobile customers obtain connectivity to telephone service. We have a Community
Service Voice Mail Program which is designed for use by non-profit organizations. The
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43 NPRM, para. 37.
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organization purchases blocks of ten voice mailboxes at discount rates for a year at a
time. Each mailbox is assigned its own telephone number and password. The
organization distributes the mailbox numbers to residents using materials that we
provide. Residents using the mailboxes record their own personal greeting and
password and give the telephone number to people trying to reach them. These people
may include potential employers, landlords, counselors, family members, and others.
Residents can then use any touchtone pay phone or private phone to check their
messages at their convenience.
The organization that secures the blocks of ten mailboxes must obtain
funding for this service, through grants or through its own internal funding sources. The
organization also needs to designate someone internally to manage the service. The
manager trains the residents, allocates mailboxes, changes passwords, and acts as a
contact for our enhanced service operation. We provide all training material for the
organization's use and train its manager on the effective use of voice mail.
Prior to beginning our current program, for which we are receiving about a
half-dozen requests per year, from October 1992 to October 1993 we conducted a
one-year trial of community voice mail service. Two organizations participated:
· The Salvation Army Gateway Center, San Francisco. Program
emphasis was on long-term transitional housing and assistance for
homeless families with children. Voice mail was used to connect
clients to potential employers, schools, doctors, and social service
agencies.
The Weingart Center, Los Angeles. This was a Community
Telephone Program site and one of the largest programs in the
nation. Program emphasis was short-term to long-term housing
and assistance for adult homeless individuals. Full in-house social
services were coordinated with county-run programs. Voice mail
was used in programs for individuals seeking permanent
employment and for HIV-positive clients connecting to health and
social service agencies.
Both organizations experienced good results with the voice mail trial. In
general, beyond teaching the basic technology to staff and clients, agencies were able
to develop creative uses of voice mail that increased the self-esteem of participating
clients and encouraged self-accountability for breaking the cycle of homelessness.
Participants were able to determine appropriate uses of the technology based on their
own needs.
One of our most successful ongoing voice mail projects involves migrant
farm workers in California's Central Valley and is sponsored by La Coopertiva
Campesina of Sacramento.[44] They have used this service for two years and have
continuously expanded it because of the improvement it provides in the farm workers'
ability to communicate with their employers and families. For this project, mail boxes
are accessed through a single 800 number.
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44 During the 1993 agricultural season, La Coopertiva Campesina de California
joined with Pacific Bell and the California Department of Economic Opportunity to
provide voice mail services to a select group of migrant and seasonal farm workers in
the state's Central Valley. These sponsoring agencies were joined by the Department
of Housing and Community Development and the Housing Authorities of Kern and
Monterey counties to provide voice mail through the Arvin and King City Migrant
Camps. For our participation in this project, in October of 1994 the Western Alliance of
Farmworker Advocates ('WAFA") awarded Pacific Bell WAFA's 1994 "Quality of Life"
award.
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2. Prepaid Debit Cards
Because voice mail boxes must be accessed through the telephone
network, prepaid debit cards could be of assistance to mobile customers. These cards
also may be of help in increasing connectivity in other ways. For instance, a debit card
used with public payphone service might potentially provide connectivity to customers
who subscribe solely to paging service.
3. Paging Services
Pacific Bell's paging service costs $8.95 per month for air time covering
one-half of California. Pagers normally list for about $50 to $90 retail, but may be
purchased for under $30.00. These pagers have a numeric read out which can supply
the return phone number or can be used for agreed upon codes (e.g., 1-0-8 could mean
"come to work tomorrow at 8 a.m."). If the mobile customer needs to call the paging
party, a payphone and debit card could be used.
Most paging companies, including Pacific Bell Paging, have voice mail
technology integrated into the paging service so that the same telephone number that
serves the pager can serve a voice mail box. The calling party can have a choice of
using the touchtone pad to leave a call-back number or other numeric message or of
leaving a voice mail message. The mobile customer can then access the voice mail
message via a payphone without having wireline service.
Unfortunately, we do not know if pagers, with or without voice mail, are
currently being used in this manner as a replacement for other service. The Census
Bureau could help find out by asking people who indicate that they do not have
residential phone service whether or not they subscribe to paging and/or voice mail
service.[45]
The marketplace is making voice mail and paging services more widely
available. With continued rapid deployment, these types of services will offer new
opportunities for non-wireline customers to have access to the telephone network.
C. Extending Telephone Service To Unserved Areas
1 . BETRS
Pacific Bell and Nevada Bell have found Basic Exchange
Telecommunications Radio Service ("BETRS") to be of assistance in extending service
to previously unserved rural areas. BETRS is a wireless local loop service, which is
also known as "radio POTS" or "last mile by radio."
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45 The use of two-way paging service has been getting a lot of recent attention.
See, e.g., "Lowly Beeper May finally Get Respect As Two-Way Paging Services
Emerge," Gautam Naik, The Wall Street Journal, September 19, 1995, Bl. We believe
that two-way service probably will be too expensive to be of help to lower-income
mobile customers in the near term. It is important to ascertain whether or not reported
monthly rates include only access or also usage, and if the latter how much usage.
PCS and cellular services are premium services that are unlikely to be of help to lower-
income customers in the foreseeable future.
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Nevada Bell has deployed two different BETRS radio systems, SRT
Telcom and Alcatel.[46] SRT Telcom radios operate in the 2.5 GHz range. Nevada Bell
obtained a waiver to be able to utilize this range because Nevada Bell does not have
instructional television which operates in the same range. The SRT system provides
the most reliable service to Nevada Bell's customers using BETRS service, but the
Commission is not allowing any additional waivers in this range at this time.
Alcatel radios operate in the 450 MHz range. Nevada Bell has
experienced many problems with this system, which result in numerous customer
complaints due to down time and the lack of clarity of the service. Moreover, at this
time, these radios are not being manufactured.
Providing BETRS in Nevada is expensive. For instance, from July 1,
1991 through August 31, 1995, providing it to 15 customers in Smoky Valley, Nevada
cost $402,924, or $26,862 per customer. Providing it to 1 0 customers in Nyala, Nevada
during that same time period cost $63,710, or $6,371 per customer. Differences in the
costs in different areas are caused by differences in distances and terrains.
Pacific Bell uses Alcatel radios for BETRS in the following areas-. Boulder
Creek (near Santa Cruz, California); in the Feather River Area (near the town of Belden,
California); at Forest Ranch (near Chico, California); and at Hallelujah Junction
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46 Both SRT Telcom and Alcatel are manufacturers of BETRS radios. Beginning
with proceedings in 1987 and continuing in two subsequent proceedings, Nevada Bell
faced an intrastate overearnings situation and petitioned the Public Service
Commission of Nevada ("PSCN") to use the overearnings for rural improvements. The
PSCN agreed to our plans to replace open wire and install BETRS, replace mechanical
switches with digital equipment, and develop special rate areas to bring remote
customers into the exchange. These are ongoing projects.
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(Northwest of Reno, but in California). BETRS is the only means of phone service for
the service station and restaurant at Hallelujah Junction, and one of the BETRS lines at
that location is the single busiest California Lottery phone line in the State of California.
Pacific Bell uses North American Telephone manufactured radios for BETRS in
Briceburg (near Yosemite National Park) and Optaphones, manufactured by Carlson
Communications, in Miranda (South of Eureka, California) and in Wawona (in
Yosemite).
Pacific Bell's experience with BETRS has been more positive than that of
Nevada Bell, probably because the distances to rural customers tend to be less vast in
California than in Nevada, and achieving line-of-sight microwave communications is
more feasible in California. Easier access to BETRS would be helpful. Originally
BETRS was limited to the 800 MHz range. That range is virtually unusable in heavily
populated states like California. Therefore, the Commission allows BETRS to use the
450 MHz range. BETRS must share that range, however, with paging. 47 Paging is high
power because it must penetrate concrete buildings. Thus, paging services create
strong interference and can make BETRS unavailable for hundreds of miles. BETRS is
low-power service, which works well only if it is line-of-sight and which creates little
interference, allowing lots of BETRS potentially to share the same frequency.
Therefore, in order to improve the ability to bring service to currently unserved areas, it
would be helpful if BETRS had its own frequency block.
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47 BETRS also shares 450 MHz with IMTS, but IMTS largely has been displaced
by cellular.
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2. Subscriber Loop Carrier Systems
Nevada Bell plans to continue to provide service using the BETRS
systems that are now in place. As these areas become more densely populated,
however, Nevada Bell intends to serve the areas with Subscriber Loop Carrier systems,
which have proven to be a more reliable and cost-effective method of providing service
to rural areas in Nevada. Currently, Nevada Bell is deploying Subscriber Loop Carrier
systems that allow reliable service to rural areas that have twenty-four or more
customers. Although Pacific Bell finds BETRS helpful for serving rural areas in
California and intends to continue to deploy it, Pacific Bell also uses Subscriber Loop
Carrier systems. Pacific Bell is using this system, for example, at Rainbow Ridge
(South of Eureka, California) for service to the FAA.
Unlike BETRS, Subscriber Loop Carrier systems are not used for local
loop service itself-, they do not employ radio directly to the customer. Subscriber Loop
Carrier systems are used for "loop extensions:" they use radio in the place of feeder
cable internal to the carrier's network. Thus, Subscriber Loop Carrier is a choice of
facility by the carrier which is transparent to the customer. These systems are useful
for instance in covering vast distances of unpopulated areas where wire or fiber cables
would be too expensive, or for crossing government land such as parks where cable
could harm the environment, or for reaching clusters of people in mountainous terrain
where using wire or fiber cables would be prohibitively expensive.
3. Third-Party Fixed Cellular
In the third quarter of 1995, Nevada Bell chose to utilize "Fixed Cellular"
as a means to provide telephone service to Antelope and Reese Valley, an extremely
remote and sparsely populated ranching community. This service has enabled
approximately 25 customers to be added to the network. Nevada Bell chose this
relatively new means of communication in place of traditional wireline service because
the distances between ranches is vast. Nevada Bell charges normal basic exchange
rates and pays the cellular provider retail rates. Nevada Bell's annual subsidy is
estimated to be approximately $100,000, making this an impractical approach for
widespread use unless universal service funding is provided.[48]
Pacific Bell's involvement with fixed cellular service has been limited to
helping some rural customers (e.g., a High Sierra camp) decide to switch from Pacific
Bell's former Improved Mobile Telephone Service ("IMTS") to third-party cellular
companies'fixed cellular services. The two-way mobile IMTS largely was displaced by
cellular service, and Pacific Bell withdrew its IMTS tariff, on condition that arrangements
were made for other service.
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48 The cost for providing the fixed cellular service in Antelope and Reese Valley
is projected at $80,000 to set-up, plus an ongoing subsidy which is projected at
$100,000 annually. The subsidy includes the difference between the cellular company's
basic rate and Nevada Bell's basic rate, plus assumed air time.
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4. Third-Party Mobile Satellite Service
Mobile satellite service may help bring two-way communication to
unserved rural areas. We understand that American Mobile Satellite Corporation
launched a data service for the trucking industry earlier this year and will soon introduce
two-way voice service throughout North America. We also understand that the new
service probably will be reasonably priced compared to other services, but probably will
not be affordable to lower-income customers. We understand that the CPE may be
priced at approximately $2,500 and that the service may be priced at about $25 per
month, plus about $1.00 per minute of use.
Competition is unlikely to bring low-priced telephone service to customers
in unserved rural areas so long as prices in served rural areas continue to be
subsidized through geographic rate averaging. If prices were close to cost in rural
areas, with targeted assistance for lower-income customers, new competitors with new
technologies might compete with wireline service in those areas.[49] Once new
technologies have been built out to rural areas that currently have telephone service,
building out- those technologies somewhat further, in order to include unserved areas,
might be economically feasible. Competition might then drive prices downward. In the
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49 With regard to any attempt to compare prices for mobile wireless services,
such as PCS, to prices for wireline services, ft should be recognized that, in addition to
being capital intensive and thus costly to establish, these wireless services provide
beneficial functionality that wireline services do not, namely mobility. This benefit has
unique expenses associated with it and makes any projected price comparisons
between mobile wireless and wireline services less meaningful.
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mean time, any requirements or incentives to provide service in these areas would
need government funding, with reimbursement of LEC costs above those that could be
recovered from the customers.
[V. CONCLUSION
For all the above reasons, the Commission should allow LECs to continue
to develop solutions for increasing telephone subscribership and to continue to work
with state commissions on this goal. Additional federal support in ways discussed
above would be helpful, but mandates are not needed and would reduce the flexibility
needed to develop solutions that address local problems. The best solutions aim at the
root cause of subscribership problems by helping customers to control their calls.
These solutions prevent the problems up-front, rather than trying to cure them later by
passing the burden onto the LECs and the general ratepayers.
Respectfully submitted,
PACIFIC BELL
NEVADA BELL
LUCILLE M. MATES
JEFFREY B. THOMAS
140 New Montgomery Street, Rm. 1522A
San Francisco, California 94105
(415) 542-7661
JAMES L. WURTZ
MARGARET E. GARBER
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
(202) 383-6472
Their Attorneys
Date: September 27, 1995
0119802.01