[Federal Register Volume 64, Number 150 (Thursday, August 5, 1999)]
[Proposed Rules]
[Pages 42635-42637]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20128]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Chapter I

[CC Docket No. 99-249; FCC 99-168]


Low-Volume Long-Distance Users

AGENCY: Federal Communications Commission.

ACTION: Notice of inquiry.

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SUMMARY: This document seeks comment on the impact of certain flat-
rated charges on single-line residential and business customers who 
make few, or no, interstate long-distance calls. The inquiry focuses on 
flat-rated charges attributable to universal service and access charge 
reform, but recognizes that other pro-competitive reforms also have 
resulted directly or indirectly in charges on consumers' bills.

DATES: Interested parties may file comments no later than September 20, 
1999, and reply comments no later than October 20, 1999.

ADDRESSES: Submit written comments or replies to the Commission's 
Secretary, Magalie Roman Salas, Office of the Secretary, Federal 
Communications Commission, 445 12th Street, SW, Counter TWA 325, 
Washington, DC 20554. For detailed filing instructions, including 
electronic filing, see SUPPLEMENTARY INFORMATION.
    The entire file is available for inspection and copying weekdays 
from 9:00 a.m. to 4:30 p.m. in the Commission's Reference Center, 445 
Twelfth Street SW, Washington, DC 20554. Copies may be purchased from 
the Commission's duplicating contractor, ITS Inc., 1231 Twentieth St., 
NW, Washington, DC 20036, (202) 857-3800.

FOR FURTHER INFORMATION CONTACT: Neil Fried, Common Carrier Bureau, 
Competitive Pricing Division, (202) 418-1530; TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION:

Background

    In May 1997 the Commission adopted for price cap local exchange 
carriers (price cap LECs) a new common line rate structure to align 
cost recovery with the manner in which costs are incurred. That 
structure, when fully implemented, will recover all interstate-
allocated common line costs through flat subscriber line charges (SLCs) 
assessed on end users, and flat presubscribed interexchange carrier 
charges (PICCs) assessed on interexchange carriers (IXCs).

Discussion

    The Commission recognized when it changed the common line rate 
structure in 1997 that it was reducing, and gradually eliminating, 
support flows that had previously run from high-volume to low-volume 
end users. For two reasons, however, the Commission did not anticipate 
that these changes would have immediate, significant effects on the 
telephone bills of those low-volume users. First, the Commission 
initially set the primary residential and single-line business PICCs at 
levels approximately equal to a universal service charge that the 
Commission eliminated when it adopted the PICC. Second, IXCs had not 
previously imposed flat charges on end users to recover that universal 
service charge. In any case, the Commission believed that, even if IXCs 
did pass on the modest initial PICCs as flat charges, most consumers 
would enjoy benefits in the form of lower long-distance rates, and that 
those benefits would outweigh the burden of a small, flat monthly 
charge. That belief has proven correct for some consumers, in that 
long-distance rates overall have continued to decline.
    Some customers of long-distance service, however, are now paying 
additional flat charges that IXCs claim recover some of the costs that 
the customers were previously paying in per-minute charges under the 
old access charge regime. A number of factors the Commission did not 
anticipate have affected consumers who make few interstate long-
distance calls.
    First, AT&T, MCI, and Sprint each charge their residential 
customers with a single presubscribed line a flat, averaged, monthly 
PICC pass-through charge of $1.51, $1.07, and 85 cents, respectively. 
The Commission has not prohibited IXCs from using such charges to 
recover their PICC costs. The Commission did, however, take steps

[[Page 42636]]

intended to make it more likely that any such charges would be modest 
in size. Specifically, as discussed above, the Commission decided to 
phase the PICC in gradually, setting the initial price-cap LEC ceiling 
for the charge on primary residential lines at 53 cents. 
Notwithstanding these prudent steps, the Commission recognizes that 
access reform requires the Commission to unravel and rationalize an 
entrenched, complex web of implicit subsidies, all at a time when 
competition and technological innovation are making unprecedented 
changes to the industry. Reforms of this magnitude and complexity will 
sometimes yield unanticipated effects, regardless of how careful the 
Commission is to avoid them. Second, AT&T and MCI have initiated 
monthly minimum usage charges for their basic-rate residential 
customers, which their customers must pay even if they make no long-
distance calls in a month. AT&T residential customers are subject to a 
$3.00 minimum. Residential customers who subscribed to an MCI calling 
plan before January 3, 1998, are subject to a $5.00 minimum; 
thereafter, customers who subscribed to any MCI residential service are 
subject to a $3.00 minimum. Third, AT&T also has chosen to recover some 
of its contribution to the Universal Service Fund through a flat charge 
of 99 cents per month on its residential customers, even though its 
contributions are not calculated as a flat charge. Thus, a residential 
customer with a single telephone line who selects AT&T as her 
presubscribed carrier, but who makes no interstate long-distance 
telephone calls in a particular month, may pay $5.50 to AT&T that 
month. An MCI customer with the same calling pattern will pay $6.07 or 
$4.07, depending on how recently the customer signed up for service. 
Previously, such customers would have paid nothing to their 
presubscribed IXCs in a month in which they made no long-distance 
calls.
    In light of these significant developments, the Commission wishes 
to inquire whether the flat charges imposed on consumers who make few 
long-distance calls are appropriate. Commenters should address whether 
the introduction of flat rate charges or minimum usage requirements is 
the result of competitive market dynamics, and whether it is reasonable 
to assume that implicit subsidies could be eliminated and competition 
introduced into previously regulated markets without some customers 
(those previously subsidized) paying more.
    The Commission also seeks comment on the extent to which the 
Commission should rely on competition to provide services suitable to 
the needs of low-volume residential customers. The Commission notes 
that a telephone customer is not required to have a presubscribed 
interexchange carrier in order to place long-distance calls. A customer 
who chooses not to presubscribe will pay the PICC directly to the LEC, 
but may not have to pay marked up, minimum-usage, or universal-service 
charges. That customer will not be able to make a long-distance call 
simply by dialing ``1+area code+number,'' but will be able to ``dial 
around'' by first dialing a seven digit code (typically ``10-10-XXX''). 
Dial-around carriers advertise heavily, and some have plans that 
feature favorable per-minute rates without additional monthly or per-
call charges. The Commission seeks comment on whether the availability 
of dial-around services means that the Commission does not need to take 
special measures to protect low-volume users. The Commission also seeks 
comment on what evidence of consumer choice would be sufficient to 
indicate that customers have adequate alternatives to calling plans 
that include these types of non-usage sensitive charges.
    The Commission also observes that, as mentioned above, some of the 
costs presubscribed IXCs claim users impose on them even when they make 
no calls may be attributable to account and billing maintenance. The 
customers' LECs, on the other hand, already incur that kind of cost in 
providing local exchange service to the customers, and would presumably 
experience little incremental costs if they became the customers' 
presubscribed IXCs as well. The Commission seeks comment, therefore, on 
whether the entry of Bell Operating Companies (BOCs) into the long-
distance market will mitigate the problems currently experienced by 
low-volume long-distance users.
    In the event the Commission determines based on the record that 
regulatory intervention is warranted to protect consumers from some of 
the actions described above, the Commission seeks comment on the scope, 
method, and its jurisdiction for such intervention. Are there measures 
the Commission can take that do not require direct regulation of IXCs, 
but that would give this Commission greater control over the manner in 
which access charges and universal service assessments are passed on to 
consumers? The Commission also seeks comment on whether efforts by the 
Commission, states, and consumer groups to educate consumers regarding 
choices they can exercise in the marketplace--choices which could 
minimize the impacts on consumers of these sorts of actions by 
carriers--could be used to reduce or eliminate the need for additional 
regulation to accomplish the same purpose. The Commission also seeks 
comment on the relationship between the impact of access reform and 
universal service charges on low volume consumers and its universal 
service obligations pursuant to section 254 of the Act. As the 
Commission has stated, in addition to seeking comment on the consumer 
impact of charges associated with access and universal service reform, 
the Commission also would like suggestions on how best to understand 
and manage the impact on consumers of charges attributable to pro-
competitive actions other than access and universal service reform.

Filing Requirements

    Interested parties may file comments no later than September 20, 
1999, and reply comments no later than October 20, 1999. Interested 
parties may file using the Commission's Electronic Comment Filing 
System (ECFS) or by filing paper copies. See Electronic Filing of 
Documents in Rulemaking Proceedings, 63 FR 24,121 (1998). All filings 
should reference the CC Docket No. 99-249.
    Parties submitting pleadings through the ECFS can send their 
comments and replies as electronic files via the Internet to <http://
www.fcc.gov/e-file/ecfs.html>. Generally, interested parties need to 
file only one copy of an electronic submission. If multiple docket or 
rulemaking numbers appear in the caption of this proceeding, however, 
interested parties must transmit one electronic copy of the pleading to 
each docket or rulemaking number referenced in the caption. In 
completing the transmittal screen, interested parties should include 
their full name, postal service mailing address, and the applicable 
docket or rulemaking number. Interested parties may also file by 
Internet e-mail. To get filing instructions for e-mail submission, 
interested parties should send an e-mail message to [email protected], and 
should include the following words in the body of the message: ``get 
form .'' A sample form and directions will be sent 
in reply.
    Interested parties who choose to file by paper must file an 
original and four copies of each filing. If more than one docket or 
rulemaking number appear in the caption of this proceeding, interested 
parties must submit two additional copies for each additional docket or 
rulemaking number. All filings must be sent to the Commission's

[[Page 42637]]

Secretary, Magalie Roman Salas, Office of the Secretary, Federal 
Communications Commission, 445 12th Street, SW, Counter TWA 325, 
Washington, DC 20554.
Federal Communications Commission.
William F. Caton,
Deputy Secretary.
[FR Doc. 99-20128 Filed 8-4-99; 8:45 am]
BILLING CODE 6712-01-P