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PA Bulletin, Doc. No. 98-1862



Implementation of Required State Review Regarding Public Interest Payphone Program and Funding Mechanism; M-00981201

Commissioners Present:   John M. Quain, Chairperson; Robert K. Bloom, Vice Chairperson; David W. Rolka; Nora Mead Brownell; Aaron Wilson, Jr.

[28 Pa.B. 5640]

Public Meeting held
October 16, 1998

Opinion and Order

By the Commission:

   The Telecommunications Act of 1996 (act) directed the Federal Communications Commission (FCC) to promul-gate new regulations which govern the payphone industry and, inter alia, ensure that all payphone owners are compensated for calls originated on their payphones and discontinue subsidies for payphones owned by local exchange carriers (LECs). See 47 U.S.C.A. § 276. A notice of proposed rulemaking (CC Docket No. 96-128) was adopted by the FCC on June 4, 1996, and released on June 6, 1996.

   On September 20, 1996, the FCC adopted and released a Report and Order implementing the payphone provisions of the act. Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, CC Docket No. 96-128 and No. 91-35, (September 20, 1996), (Report and Order). On November 8, 1996, the FCC released the Order on Reconsideration. Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, CC Docket No. 96-128 and No. 91-35, (November 8, 1996), (Reconsideration Order). A summary of the Reconsideration Order was published on December 12, 1996 at 61 Fed. Reg. 65341. The FCC, finding no new evidence or arguments, made no significant changes to the September 20, 1996 Report and Order. Essentially, the FCC affirmed its position that the payphone market is fundamentally competitive and can be safely deregulated so as to permit market forces to set rates for local coin calls. Reconsideration Order, 61-62.

   In the Report and Order, the FCC had also directed each state to examine its regulations applicable to payphones and payphone service providers, removing or modifying those that erect barriers to entry or exit and thereby affect the ability of companies to compete in the payphone industry on an equal footing. Report and Order, 60. Furthermore, in response to Congress's concern expressed in section 276(b)(2) of the act, the FCC concluded that a need exists to ''ensure the maintenance of payphones that serve the public policy interests of health, safety, and welfare in locations where there would not otherwise be payphones as a result of the operation of the market.'' The FCC was concerned about the access to emergency services in isolated areas with low residential phone penetration. Report and Order, 277.

   The FCC expressed the opinion that states are in a better position to ascertain the need for payphones which serve community interests. Report and Order, 278. However, the FCC believed that the act directed the agency to impose guidelines for establishment of a public interest payphone program. Report and Order, 281. Ultimately, the FCC in its Report and Order at paragraph 285, reached the following conclusion:

. . . we direct each state to review whether it has adequately provided for public interest payphones in a manner consistent with this Report and Order. In particular, each state should evaluate whether it needs to take any measures to ensure that payphones serving important public interests will continue to exist in light of the elimination of subsidies and other competitive provisions established pursuant to Section 276 of the 1996 Act, and that any existing programs are administered and funded consistent with the requirements described above. This review must be completed by each state within two years of the date of issuance of this Report and Order, and may be conducted in conjunction with each state's study of the payphone marketplace which we are requiring in connection with the transition to market-based payphone compensation.

   We initially recognized our responsibilities on this issue in our decision on the Petition of the Pennsylvania Telephone Association Regarding Paystation Deregulation Compliance Filing, P-00971166 (Order entered March 14, 1997), (PTA Petition), page 5, which states as follows:

The FCC established a national guideline whereby the companies providing public interest payphones are to be fairly compensated for the cost of such services. The FCC allows the individual state commissions to determine whether they want to adopt rules for funding and maintaining such a program.

After noting that Pennsylvania's Universal Service Fund may be used to fund public interest payphones, we directed the Universal Task Force to consider this issue and requested the submission of recommendations and comments on public interest payphones and their funding. PTA Petition, page 13.

   In the Final Report and Recommendation of the Pennsylvania Universal Telephone Service Task Force, filed September 29, 1997, at Docket No. I-00940035,1 the following decision was made with respect to our obligation in addressing this matter:

With respect to the issue of public interest payphone funding, the Subcommittee concludes that the issue is too complex to be addressed within the time allotted. Further, much of the information that the Subcommittee needs to consider will not be available until after October 7, 1997, the date on which the regulation of payphone prices is scheduled to end. The Subcommittee will address this issue when the requisite information becomes available, and will submit a supplemental report to the Commission concerning this subject.

Universal Service Task Force Report, page 3. Thereafter, we had the occasion to address this issue again in a rulemaking docket.

   On April 10, 1998, we issued a Final-Form Rulemaking Order in Rulemaking to Rescind Obsolete Regulations Regarding Telephone and Residential Telephone Service, 52 Pa. Code Chapters 63 and 64, Docket No. L-00960113.2 In considering § 63.95, originally named as ''Sufficiency of public telephone service,''3 we noted that the requisite information on this subject was still not available and also cited the quotation in the Universal Service Task Force Report that the issue was ''too complex to be addressed within the time allotted'' (page 22). Furthermore, we acknowledged that as opposed to complaints about the low level of residential payphone penetration, the complaints we now receive pertain to having an overabundance of payphones and the role they play in illegal activities (page 22). It is a rare occasion for our Bureau of Consumer Services to receive a complaint that a payphone was needed at a certain location.

   In the Final-Form Rulemaking Order, we essentially retained only subsection (c) of § 69.95,4 which we believed to be consistent with the FCC's directive on implementing a public interest payphone program. Revised § 69.95, which recognizes the Commission's authority to require a payphone service provider to place a coin telephone, is consistent with the FCC's delegation of authority over public interest payphones to the states. We anticipate requiring the closest payphone service provider in that area to place another coin telephone at the needed location. In any event, decisions on requests for the placement of a coin telephone will likely be made on a case-by-case basis. Given the complexity of implementing a public interest payphone funding mechanism and the speculation as to when and where a public interest payphone5 would be needed, we find that imposing a funding mechanism is unwarranted, and we therefore decline to adopt rules to implement funding.

   Moreover, in the April 10, 1998 Final-Form Rulemaking Order, we stated definitively that we have ''adequately provided for public interest payphones,'' as directed by the FCC in its Report and Order (¶285). Specifically, we stated that ''[i]n any event, existing paragraph (c) is consistent with the FCC's directive since the regulation contemplates that we would ensure the placement of public telephones at certain locations to promote the public interest'' (page 22). Our determination in the April 10, 1998 Final-Form Rulemaking Order effectively satisfied the 2-year time period for State review established by the FCC in its Report and Order.

   Finally, the FCC has imposed a safeguard to assure the sufficiency of state action. Under paragraph 286 of its Report and Order, the FCC made the following statement:

If interested parties believe that a state is not supporting public interest payphones fairly and equitably, such parties may file a petition with the Commission asserting that the state is not providing for payphones in accordance with Section 276(b)(2) and the guidelines we adopt in this Report and Order, as may be amended from time to time.

To the extent that any interested party believes that our treatment of public interest payphones, in particular our decision not to impose a funding mechanism, is unfair or inequitable, they may petition the FCC for relief; Therefore,

It Is Ordered That:

   The Federal Communications Commission's (FCC) requirement that the Pennsylvania Public Utility Commission adequately review its public interest payphone program and funding mechanism consistent with the FCC's September 20, 1996 Report and Order has been satisfied.


[Pa.B. Doc. No. 98-1862. Filed for public inspection November 6, 1998, 9:00 a.m.]


1  This report and recommendation was adopted and approved by the Commission by Final Opinion and Order entered February 2, 1998.

2  The Final-Form Rulemaking Order was published in the Pennsylvania Bulletin on July 18, 1998 at 28 Pa.B. 29.

3  Annex A to the Final-Form Rulemaking Order has the section titled ''Coin telephone service in the public interest.''

4  Section 63.95 only remains as one sentence, which provides as follows:
      [(c)] The Commission may require a [local exchange carrier or a nonpublic utility] payphone service provider to place or replace a [public] coin telephone at a particular location if it is determined that a placement or replacement is in the public interest.

5  The definition of public interest payphone is ''a payphone which (1) fulfills a public policy objective in health, safety, or public welfare, (2) is not provided for a location provider with an existing contract for the provision of a payphone, and (3) would not otherwise exist as a result of the operation of the competitive marketplace.'' Report and Order (¶282).

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