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Standard for Comparing Local Service Options for Use in a Consumer Education Program on Telephone Competition; Doc. No. M-00011580

[32 Pa.B. 2560]

Public Meeting held
April 11, 2002

Commissioners Present:  Glen R. Thomas, Chairperson; Robert K. Bloom, Vice Chairperson; Aaron Wilson, Jr., statement attached; Terrance J. Fitzpatrick; Kim Pizzingrilli

Order

By the Commission:

   On November 9, 2001, the Commission issued a Tentative Order requesting comments on the possible establishment of a universal standard for comparing local service options for use in a Consumer Education Program on Telephone Competition. The Commission envisioned that this ''standard offer'' would be similar to the ''price to compare'' for electric generation that was fundamental to the success of consumer education in the Electric Choice program. By establishing such a tool, the Commission viewed the standard offer as a way to reduce customer confusion and give customers the essential information that they need to do comparison shopping for local telephone service. It was intended that the standard offer would be used when consumers apply for residential telephone service by phone with a local exchange carrier (LEC) service representative providing the customer with this information. However, the Commission was uncertain about what information/standard would assist consumers in shopping, but would, at the same time, foster competition in the local telephone service market. Therefore, the Commission also asked commentators to respond to six specific questions regarding the possible effects of establishing such a universal standard on competition.

   The Tentative Order was published at 31 Pa.B. 6763 (December 8, 2001). The Tentative Order provided for a 10-day comment period. The deadline for filing comments was December 18, 2001. Eleven parties filed comments. They include the Office of Consumer Advocate (OCA), Office of Small Business Advocate (OSBA), the Office of Trial Staff (OTS), Pennsylvania Telephone Association (PTA), Verizon Pennsylvania Inc. and Verizon North Inc. (VZ), the Commission's Consumer Advisory Council (CAC), AT&T Communications of Pennsylvania, Inc. (AT&T), MCI Worldcom Network Services, Inc. (MWCOM), RCN Telecom Services of Philadelphia Inc./RCN Telecom Services Inc. (RCN), National ALEC Association/Prepaid Communications Association (NALA/PCA) and Metro Teleconnect Companies, Inc. (Metro Teleconnect).

   The Commission considered all the comments and expresses its appreciation to the commentators for their helpful information and thoughtful observations.

Discussion

   Various commentators (AT&T, MWCOM, Metro Teleconnect, PTA, VZ, RCN, NALA/PCA) are opposed to the implementation of a universal standard to compare the price of the local service options for a number of reasons. In its comments, MWCOM expressed its concerns about the Commission setting a price to compare for basic local service.

   AT&T expressed concerns about the Commission developing a price to compare chart that would set a universal price to compare. AT&T states that it is ''difficult to envision how the price to compare chart could be maintained accurately and reliably in light of the Commission's own recently enacted rules governing local exchange tariff filing requirements. 52 Pa. Code §§ 53.57, et seq. Those new rules, for example, permit carriers to implement certain price changes on as little as one day's notice. See, e.g. 52 Pa. Code § 53.59(a).

   PTA's comments address the impracticality of implementing a standard for local service. PTA states that local service can potentially involve a multitude of varying rate components that make a single simple comparison price virtually impossible to ascertain. One example is that local service can be priced as a fixed rate without usage, or based solely upon usage or some combination. PTA also states that to further complicate usage charges some Incumbent Local Exchange Companies (ILECs) have rate bands that provide for varying charges for usage based upon an individual customer's location or the exchange's aggregate calling patterns.

   According to PTA, all LECs must assess mandated charges (e.g., subscriber line charge, emergency 911 surcharge, PA relay charge, federal universal service charge, taxes, etc.), but all do not have the same obligation to collect these charges. For example, some Competitive Local Exchange Carriers (CLECs) frequently forego application of the subscriber line charge by incorporating their costs directly into the end-user, consumer rates. PTA adds that ILECs may be bound by interstate tariffs that forestall transition from interstate cost recovery to intrastate local rates. NALA/PCA comments on the difficulties associated with determining the rate in extended calling areas.

   VZ also comments about the impracticality of producing a standard for comparing prices for local service options. VZ explains that, for example, it has five different rate groups across the state and at least eight major classes of basic service, some with further variations and some available in some areas but not in others. VZ does concede that the residential flat monthly rate for unlimited calling is probably the most unobjectionable price comparison. However, VZ points out that the LEC flat rate price differences in different geographic areas of Pennsylvania would need to be taken into account. For example, VZ flat rate service charges vary both by five usage rate groups and by four density cells--resulting in numerous different discreet flat rate charges that are dependent upon where the consumer lives.

   There were fewer commentators (OCA, OSBA, CAC, and OTS) that expressed general support for the Commission's efforts to construct a price to compare tool. OCA, although arguing in favor of implementing the rate comparison standard, recognizes that such a standard would be difficult to formulate. OCA submits that in order to accurately reflect the full range of local service pricing options available, the Commission should recognize that the standard or monthly local service charge will vary depending upon whether a customer is enrolled in a flat or measured usage plan. Also, OCA states that different types of ''flat monthly fee'' rate options may be selected corresponding to the various types of enlarged calling areas that customers may choose, including Local Area Unlimited calling (VZ's basic flat rate calling option). Additionally, OCA points out that flat monthly rate plans may vary in price upon location. For example, Sprint offers flat rate calling packages that vary based upon the rate groups or rate bands under which customers take service. Such rate bands usually vary by the exchange in which the consumer resides.

   The OSBA states that it ''. . . disagrees with the idea of obligating the industry to offer any random service elements as a package or plan represented for price comparisons. However, offering basic or baseline service packages or plans for price comparisons and distinct services or elements standing-alone for price comparison is reasonable.'' Nevertheless, the OSBA asserts that small business customers have different needs and that the price to compare data would have to be different. As such, ''small businesses cannot depend upon the unlimited local calling area to be sufficient for its telecommunications needs.''

   For example, the OSBA states:

   ''The information for price to compare data should contain at a minimum: (1) the business flat monthly rate for unlimited local calling within the calling area equal to, or larger than the calling area provided by the ILEC,¹

(2) the rate for toll calls (intraLATA intrastate calls), (3) the rate for the stand-alone component for voicemail, (4) the rate for the stand-alone component of Caller ID, and (5) the rate for the stand-alone component of call forwarding. These components may be different from those experienced by residential customers.''

   As a result of these comments, the Commission has determined that the implementation of a universal standard to compare the price of local service options is not practical given the nature of local service in this Commonwealth.² However, we believe that the price of a LEC's least expensive local basic service option is fundamental information that the consumer should have so that he or she can make an intelligent decision in selecting among LECs and their various service packages. Moreover, the Commission firmly believes that all LECs must comply with those provisions of Chapter 64 that require LECs to make consumers aware of the least cost local service option when they apply for local telephone service. LECs are free to discuss the other service options including bundled service packages once they inform applicants of the least cost service option as required by existing regulations.³

   The Commission's position on offering bundled local service packages is explained in our North Pittsburgh order, Docket No. P-00011899. PTA and AT&T note in their comments that the Commission found North Pittsburgh Telephone Company's (North Pittsburgh) single rate plan to be in the ''consumer's interest'' when it granted the company a petition for waiver of certain sections of Chapter 64. While the Commission recognizes the benefits of companies selling bundled service packages, it also recognizes its obligation to enforce the consumer protection provisions of its regulations. The Commission's decision to grant waivers to North Pittsburgh was based on the company's assurance that it would ''honor the underlying goal of the Chapter 64 requirements at issue, namely the preservation of the residential customer's basic service.'' North Pittsburgh's implementation of single rate package plans would be ''conducted in a manner which retains the protection afforded by Chapter 64.'' The Commission did not waive any fundamental protection relating to the application process, information provided at the time of application, suspension/termination or dispute resolution⁴ . The waivers granted to North Pittsburgh apply only if an applicant or customer elects to buy a bundled service. Specifically, the waivers apply only to monthly billing and the application of customer payments, as long as the account is not in collection for past due amounts. Therefore, the price of a LEC's least expensive local basic service option must be provided to all customers during the application process.

   Again, we believe that the price of a LEC's least expensive local basic service option is fundamental information that the consumer should have so that he or she can make an intelligent decision in selecting among LECs and their various service packages. All LECs are obligated to comply with the provisions of § 64.191(b)(1), which requires LECs to ''explain and give the price of the least expensive type of single party service.'' We further believe that all LECs should provide information on the least expensive type of single party service upon request of the customer of record for an existing account.

   Accordingly, we will direct the Office of Communications to include, in the Commission's Consumer Education Program, materials to educate consumers about their right to request and receive information about the least expensive local basic service option when making application to a LEC for service or upon request to the LEC by an existing customer. Also, because this regulatory requirement is already in place, we do not see that additional costs will be imposed on the LECs by having the Consumer Education Program develop and distribute materials that inform consumers that they have a right to request such information.

   Various commentators who opposed the implementation of the local service option pricing standard commented on alternatives and volunteered to help in their formulation. PTA indicated that the Consumer Education Fund should be used to provide information to consumers about telecommunications choices, the various services available and the types of questions that consumers can ask to receive information that can be used in making decisions about their telecommunication service choices.

   VZ suggests that the Commission's Bureau of Consumer Services with input from the LEC industry develop both a customer education brochure and Commission website features that provide information consumers should know when making decisions about selecting telecommunication services. Both the brochure, that would be distributed via the Commission's normal customer education channels, and the website should include a user-friendly checklist (printable from the website) with side by side service/price entries. The checklist would allow customers to do an easy cost comparison by deciding and checking off the specific LEC services the customer wants and then calling the LEC serving the customer's area to obtain, write down and compare rates for these services. To the extent that the services desired are included in LEC service packages, the checklist should contain space to note package contents and prices to facilitate price comparisons with other LECs' services and packages.

   RCN suggests that given the overlap of the subject matter the Consumer Education Plan should be addressed in the Customer Information collaborative. Docket M-00011582.

   Commission Staff is already formulating the Consumer Education Program in conjunction with the Council on Utility Choice⁵ (CUC). Moreover, the CUC has representatives from the telecommunications industry and consumer organizations so the formulation of the Consumer Education Program has input from a range of interested parties. Therefore, it is unnecessary to assign to the Collaborative on Customer Information the task of designing a Consumer Education Program. However, we adopt Verizon's suggestion that the Commission's Bureau of Consumer Services be included as part of the Commission staff charged with formulating our Consumer Education Program in conjunction with the Council on Utility Choice. The other suggestions, including Verizon's proposal that industry and BCS develop an education brochure and that information be posted on the Commission's website, are more appropriate forwarded to the Office of Communications and the CUC for their consideration; Therefore;

It is Ordered That:

   1.  The Tentative Order on Standard for Comparing Local Service Options for Use in a Consumer Education Program on Telephone Competition is not adopted as proposed.

   2.  The Consumer Education Program include materials to educate consumers about their right to request and receive information about the least expensive local basic service options when contacting LECs for service pursuant to Commission regulations at 52 Pa. Code § 64.191.

   3.  That a copy of this order and any accompanying statements of the Commissioners be served upon all jurisdictional LECs, the commentators at this docket, the Pennsylvania Telephone Association, the Pennsylvania Cable and Telecommunication Association, the Office of Consumer Advocate, the Office of Small Business Advocate, the Office of Trial Staff, posted on the Commission's website at http:\puc.paonline.com and shall be made available to all other interested parties.

   4.  That this Order be published in the Pennsylvania Bulletin.

JAMES J. MCNULTY,   
Secretary

Standards for Comparing Local Service Options for Use in a Consumer Education Program on Telephone Competition	Public Meeting April 11, 2002 APR-BCS-0001* Doc. No. M-00011580
Interim Guidelines Establishing Procedures for Changing Local Service Providers for Jurisdictional Telephone Companies	Public Meeting April 11, 2002 APR-BCS-0002 Doc. No. M-00011582
Interim Guidelines Establishing Customer Information Guidance to Local Service Providers for Jurisdictional Telecommunications Companies	Public Meeting April 11, 2002 APR-BCS-0003 Doc. No. M-00011582, F0002
Interim Guidelines for Establishing Quality of Service Procedures for Jurisdictional Telecommunications Companies	Public Meeting April 11, 2002 APR-BCS-0004 Doc. No. M-00011582, F0003
Interim Guidelines Establishing Local Service Provider Abandonment Process for Jurisdictional Telecommunications Companies	Public Meeting April 11, 2002 APR-BCS-0005 Doc. No. M-00011582, F0004

Statement of Commissioner Aaron Wilson, Jr.

   In these cases, the Commission sought comments regarding proposed guidelines on (1) Comparing Local Service Options for Use in Consumer Education; (2) Procedures to Change One's Local Service Provider; (3) Customer Information to be provided to consumers by Local Service Providers; (4) Quality of Service guidelines for Local Service Providers; and (5) Abandonment Processes when a Local Service Provider exits the market.

   I have legal and policy concerns about these guidelines. I urge the regulated community and the public to address those concerns.

   The Legality of the Interim Guidelines. I understand the commentators' claim that these ''interim guidelines'' may not be enforceable because binding requirements can only be established under the Commonwealth Documents Law and the Regulatory Review Act. I am concerned that staff dismisses this claim by noting that ''adherence to these guidelines will result in reasonable and adequate service as required by Section 1501 of the Public Utility Code.'' Docket No. M-000111582, F0002 at 25, emphasis added. This approach appears very similar to a general rule of future applicability, which, if violated, will have adverse consequences on a utility's compliance with Section 1501 of the Public Utility Code. Redmond v. Milk Marketing Board, 363 A.2d 841, 843 (1976); The Choice Between Adjudication and Rulemaking for Developing Administrative Policy in Pennsylvania, 4 Widener Journal of Law 374-402 (1995). This Commission has very recently been criticized for using policy statements to issue binding norms. See Docket No. L-00010152, Proposed Revisions to 52 Pa. Code § 41.14, Statement of Senator David J. Brightbill.⁶

   The General Scope of the Interim Guidelines. The definition sections in the guidelines on Local Service Options, Changing Local Service Providers, Customer Information, Quality of Service, and Abandonment are limited to telecommunications services. That approach overlooks the fact that information services, a legal term crafted by the federal government's Federal Communications Commission (FCC) to justify their regulatory control over internet policy, are of critical importance and interest to all customers in this Commonwealth. The guidelines should include information services and other services, notwithstanding the FCC's current position that it alone is the sole source provider of internet policy, so that Pennsylvania can act in response to future developments expanding the scope of our authority to promote internet access or broadband development. It is easier to exercise concurrent or reserved power in response to newly acquired authority than to do develop a complete set of new regulations. See California ISP Association, Inc. v. Pacific Bell Telephone Company (U-1001-C); SBC Advanced Solutions, Inc. (U-6346-C) and Does 1-20), Case No. 01-07-27, March 28, 2002 (Interstate authority of the Federal Communications Commission does not automatically preempt state authority in matters related to Digital Subscriber Line (DSL) transport and information services).⁷

   The Statutory Obligation to Serve, the Provider of Last Resort Problem, and Bond Requirements. In the telecommunications industry, some carriers have obligations to serve while other carriers may not. In addition, the larger incumbent local service providers can function, and they do, as de facto providers of last resort when another local service provider exits a market without proper assurances that all consumers can continue their telecommunications and information services. The obligation to serve and the de facto provider of last resort functions cannot be delivered without cost. Those costs may be particularly aggravated in those instances, and we have had them here at the Commission, where local service providers exit the market before the appropriate arrangements are in place to make sure that all consumers continue to receive their services.

   The Commission resolved some of those problems in the electric and gas industries by the imposition of minimum bond requirements. These interim guidelines are silent on this. The industry and the public are urged to evaluate this issue and to propose solutions in the collaborative.

   Docket No. M-00011580--Local Service Options for Consumer Education. This nonbinding guideline requires all local service providers to ''comply'' with Chapter 64 by informing a consumer about ''the least expensive basic service option'' although the guidelines do not implement ''a universal standard to compare the price of local service options.'' Docket No. M-00011580 at 5. If this ''least expensive option'' is for service other than a ''flat monthly fee for all such calls made,'' Section 1324(a) of the Public Utility Code requires that the local service provider offer the option of service for a flat monthly fee. The interim guidelines may be encouraging the violation of Section 1324(a) because consumers are not advised of their minimum Section 1324(a) options.

   Docket No. M-00011582--Changing Local Service Providers. Staff limits the scope of these guidelines to ''residential customers'' with the exception of E911 and Directory Listings/White Pages. 911 and Directory Listings/White Pages apply to all customers. Annex A at I.B. I have two concerns.

   First, the Commission's definition of basic local universal service, defined in Docket No. I-00940035 (March 30, 1995) at p. 16, adopts and expands on the Federal Communications Commission (FCC) definition of basic local universal service. The FCC definition includes, inter alia, access to directory assistance, operator services, emergency services, and telecommunications relay service, without regard to customer class. The approach taken in these guidelines may not be consistent that approach or the Commission's own precedent under state and federal law.

   Second, staff does not fully explain why the guidelines apply to business customers, or consumers in the parlance of Docket No. M-00011580, for some purposes but not others. This is significant.

   Today, the Commission has before it, at Docket No. A-310886F2000, a local service provider's proposal to abandon service to 377 of its business customers. The service provider, however, only has plans to ''transition'' 177 of those 377 customers to an alternative service provider. The remaining 200 customers are left with the obligation to provide ''customer instructions'' to the old service provider, even though that provider is no longer subject to our jurisdiction, in order to continue service.

   The abandonment of customers and their services before customer transition plans are completed, and which assure customers that their service will not be interrupted, results in a crisis management approach to transitions that can only increase transition costs. Moreover, unlike the electric and gas industries, there are no compensatory bonds available to compensate the successor local service providers for the increased cost of taking on new customers with a myriad of service needs at the last possible moment.

   This is not conjecture.

   Last week, a company with 2 facilities, 82 direct dial lines, 23 channels, and 150 employees contacted the Commission because their local service provider is abandoning service in such a shortened time period (30 days as opposed to 60 days) that it will lose local service and be unable to operate unless the Commission and Verizon cooperate to solve the problem. The employer was told in March 2002, when they first contacted the Commission, that ''we have no authority'' over such matters and to contact the FCC.

   This is not a new problem.

   The Commissions' failure to expressly develop meaningful exit procedures before we approve abandonments of service and the failure to include business customers within the guidelines' ambit may be unwise. This practice ensures that customers will continue to experience inadequate ''transitions'' and deal with a Commission that may be less interested in their lost service or service quality problems in comparison to residential customers.

   The Chairman remands the issue of including businesses to the collaborative. I reluctantly support that approach because I prefer to include business customers and leave the details to the collaborative. The concern that the inclusion of business customers requires another layer of regulation overlooks economic reality. Business customers, and most particularly the small and mid-sized businesses, provide the jobs, economic development, tax sources, and assessment base that benefit the residential customer class. Businesses rely on safe, adequate, and reasonable utility services in order to provide residential Pennsylvanians with the employment they need to meet their utility obligations. The failure to include business, given their economic role in this Commonwealth, may be counterproductive to competition and the public interest.

   Docket No. M-00011582, F002--Customer Information Guidance. Consistent with my comment on Changing Local Service Providers, I am very concerned that this guideline is also limited only to residential customers.

   Docket No. M-00011582, F003--Quality of Service Procedures. I am disturbed by staff's approach to the Communications Workers of America's (CWA) comments about service quality declines. I am not as certain as staff that the Commission's processes, which are very removed from the day-to-day field operations in the industry, are sufficient to justify dismissing comments about service quality declines as irrelevant. I urge the CWA to use their experience and expertise in the collaborative by providing us with concrete suggestions to resolve any industry-wide service quality issues.

   I am also interested in comments on why this guideline is not a rule of universal applicability, normally reserved for regulations as opposed to policy statements, given staff's frank admission that the guideline constitutes the ''ground rules'' for all Local Service Provides. See Staff Recommendation at p. 5.

   Finally, this voluntary guideline focuses almost exclusively on Transfers of Customer Base (Involuntary Migration). The guideline assumes that a service provider abandons all service in the Commonwealth when they abandon customers. That is not always the case. There have been cases where the service provider merely wants to shed customers while remaining in business or abandons some customers while retaining the abandoned exchanges in their tariff. Comments on managing this challenge are sought.

   Docket No. M-00011852, F0004--Abandonment Process for Local Service Providers. This guideline, in direct contrast to the others, appears to include business customers. See Annex A, Part I.A(1) and Staff Recommendation at p. 3. I commend staff's approach, but wonder why the wisdom of this approach was not adopted in the other guidelines.

   I also have a few comments on the Pre-Termination Embargo Process. First, the Pre-Termination Embargo Process does not apparently distinguish between undis-puted and disputed reasons for a service embargo. See Annex A, Part III.B.(1)-(4).

   Second, the Pre-Termination Embargo Process' confine nonpayment of charges disputes to the filing of a ''complaint'' as opposed to invoking Alternative Dispute Resolution (ADR) or any of the Commission's other informal and cost-effective processes. See Annex A, Part III, C.(4).

   Third, the Embargo Notification is provided only to the Secretary and the Bureau of Consumer Services. The Commissioners should be notified as well given their role at the Commission. See Annex A, Part III, D. (1)(c).

   Fourth, the obligations of Section V.D (1) can be triggered by a certificate authorizing abandonment or revoking a certificate to provide service even if those actions arguably terminate the Commission's jurisdiction. It may make more sense to confirm that an exiting service providing complies with our abandonment measures before any order issues that will terminate our authority.

   Fifth, the staff fails to include the Commission's own customer service telephone numbers as a contact source for more information on Customer Notices. Although I recognize that the local service provider might be the contact of first resort, there must be a time and place to inform the consumer about the Commission's availability. That needs to be addressed.

[Pa.B. Doc. No. 02-922. Filed for public inspection May 17, 2002, 9:00 a.m.]

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¹  Typically this is the ''B1'' rate.

²  As the Commission has decided against implementing a price to compare standard because of impracticality, it is unnecessary to discuss other issues raised by the commentators.

³  According to § 64.191(b)(1) if an applicant applies for service by telephone the LEC service representative shall explain and give the price of the least expensive single-party basic service.

⁴  The North Pittsburgh Telephone Company also agreed to provide a disclosure statement (subject to the right of the Commission to review the disclosure statement) to customers who order a single price package plan which details the billing practice in the event a customer fails to pay under the agreed terms of the package plan. In addition, the Commission directed North Pittsburgh to ''identify on bills those charges for which failure to pay will not result in disconnection of the customer's basic service, pursuant to the FCC's ruling concerning Truth-in-Billing and Billing-Format⁴.'' See, CC Docket No. 98-170; FCC 00-111, released July 13, 2000. The Commission found that ''the single rate package plan and proposed billing methodology are in the consumer's interest provided that all assertions with respect to notice to the consumer to be contained in the disclosure statement are satisfied.''

⁵  The Council on Utility Choice members include representatives from OCA, CAC, and PTA.

⁶  The fact that interim guidelines were used in restructuring the electric and gas industries, under specific State law and without legal objection by the regulated community, does not necessarily justify agency actions acting under Federal and State law.

⁷  This case is cited to underscore the uncertain and tentative nature of state and federal authority on the internet, internet access, and broadband deployment involved in the ''information services'' sector of the evolving telecommunications industry.

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