October 23, 1995
Residential IntelliLineQ BRI Service
PSC Docket No. 95-014T
Dear Mr. Burcat:
I am writing to express our views about the residential ISDN tariffs filed by Bell Atlantic for Delaware consumers. We have been asked to do so by Delaware consumers who object to Bell Atlantic's proposal to charge consumers by the minute to make local telephone calls.
The Consumer Project on Technology was started by Ralph Nader this year to address a wide range of issues related information technologies, intellectual property rights, and personal privacy. Our "home page" on the Internet is http://www.cptech.org/cpt.html.
In our view it is extremely important to get residential ISDN pricing right, because this technology can provide Delaware citizens with highspeed telecommunications connections using the existing public switched network. This network, unlike cable television or video dialtone networks, is open, and gives consumers a wide array of choices for competitive providers of information services.
BA has been very slow to deploy this service, even though the technology is mature. Like several local exchange telephone companies, BA is seeking to price residential ISDN services far above the cost of the upgrade from POTS to ISDN. Independent cost studies of ISDN service in Massachusetts and Tennessee place the incremental cost of ISDN service (over the cost of POTS) at less than $10 per month, for 2B+D BRI service, and we have heard some estimates as low as $2 per month. Moreover, very little of that cost is sensitive to usage, but rather is related to the fixed costs of maintaining the network infrastructure.
In several states BA has defined its "daytime" for ISDN usage to end at 7 pm, rather than the more tradition 5 pm. BA's proposed usage charge of 2 cents per minute per B channel for daytime use is excessive. There is no reason at all to charge by the minute for calls after 5 pm, when the network is slack.
BA has expressed concerns in several venues that ISDN users will become heavy users of the service, logging on to the Internet for hours at a time. But unlike electricity or natural gas, most telephone network usage does not consume new resources, but rather makes more efficient use of the high fixed cost network. Only if BA can show that residential ISDN users cause significant increases in peak demand would it make sense to have a tariff that discouraged usage, and then only for those hours, and at a price that accurately reflected the congestion costs. Moreover, as the Commission is no doubt aware, changes in telecommunications technology have radically lowered the costs of adding peak load switching capacity, and if the Commission imposed a usage free for peak hours, that too should be capped so that fees do not exceed the cost to BA of the increased capacity. If the cost of the increased peak capacity for residential ISDN users is trial or small, the rate should be flat rate 24 hours per day. One of the important potential benefits of a 24 hour flat rate ISDN tariff will be to make it easier to "telecommute," using the high speed ISDN connection from homes during business hours.
Why is BA trying to charge such high fees for its residential ISDN service? Perhaps BA does not want to commit itself to an affordable ISDN tariff at a time when it is planning to enter video and other information service markets. Perhaps BA wants a "bite of the apple" every time a consumer connects to an information service. Indeed, many people see the per minute charge as an attempt by BA to capture some of the value consumers place on access to the Internet.
There may be other strategic reasons why BA is dragging its feet on this service. But none should prevent the Commission from taking steps to insure that Delaware consumers can use the exiting public network to connect to the information service providers of their choice.
I would caution the Commission from accepting many of BA's claims at face value. In Virginia, BA told the Commission that they could not offer a flat rate ISDN tariff because the BA billing system couldn't handle a flat rate -- even though BA offers POTS in Virginia under a flat rate! BA also told the Virginia Commission that it consider residential ISDN service "competitive," because it would compete with BA's POTS and a modem!
Other local exchange companies have had similar credibility problems with regard to ISDN. For example, in Tennessee, Bell South's estimate of the "incremental" cost of residential ISDN (over and above POTS) was $36 per month, while the Commission's staff calculation was $9.77 per month -- less than one third the Bell South figure. Bell South exaggerated its costs. One consultant noted that Bell South included "practically every nut and bolt of the loop plant, buildings and land." Because the Tennessee commission questioned the Bell South cost study, Tennessee consumers can now obtain flat rate residential ISDN service (2B+D) for $33 per month.
Other states also have rates lower than the one proposed by BA for Delaware. For example, in California, ISDN from PacBell is priced at $24.95 per month, and unmetered after 5 pm and on weekends, with a free install for consumers willing to commit to two years of the service.
We were pleased to read Patricia Stowell's October 18, 1995 letter from the Office of the Public Advocate (OPA), opposing the BA tariff, and recommending the Commission carry out an independent review of the BA cost study. However, we urge the Commission to make this an open process. Apparently BA has submitted a cost study under seal, so that it is a secret from Delaware consumers. BA does not face competition for residential ISDN service, and it will not face competitive harm if the study is made public. Consumers who will be ask to pay the BA residential ISDN tariff deserve an opportunity to question the basis for their rates.
The Consumer Project on Technology is available to provide additional assistance to the Commission, at your request. Thank you for the opportunity to share these comments.
Director, Consumer Project on Technology