CPT's Talking Points on ISDN Tariffs
- ISDN is the cheapest and most readily available technology
for converting the current analog-digital-analog voice public
switched network to an end to end digital network. Other technologies,
such as ADSL, HDSL or other xDSLs, will likely replace current
ISDN technologies, but not for several years, due to the need
to develop better standards and make additional investments in
network upgrades. ISDN is a here and now step that is cheap to
- ISDN was first developed by the local exchange carriers (LECs)
for voice. ISDN was deployed to provide feature rich Centrex
service to businesses, that would compete with PBX services.
In past rate cases, the LECs said that the costs for ISDN voice
services were only a few dollars per month more than "Plain
Old Telephone" (POTS) service. Most experts think that residential
BRI service costs the LEC less than $4 per month more than POTS
- Many LECs are trying to get huge fees for residential ISDN
services, but there are reasonable rates in some states. In Arkansas,
the Northern Arkansas Telephone Company charges only $17.90 per
month, flat rate, for residential ISDN service. In California,
the Roseville Telephone Company charges $29.50 for residential
ISDN. Four of the five Midwest states served by Ameritech offer
ISDN at a little more than twice the POTS rate with no per minute
charges (Illinois $28.05 to $34.50, Ohio $32.20, Michigan $33.51,
and Wisconsin $30.90). In Tennessee, BellSouth charges $25 to
$29 for flat rate ISDN. The Delaware PSC just approved a $28.02
flat rate for Delaware. In New Mexico, the Commission recently
approved a $40 flat rate.
- All of these prices are far above the LECs "incremental
costs" of upgrading a POTS line to an ISDN line. The big
issue for the Commissions are how large a profit or "contribution
to joint costs" to allow for ISDN. Some LECs, like NYNEX,
Bell Atlantic and US West want to price ISDN as some extravagant
service only used by telecommuters.
- A big issue in the rate cases concerns usage. Several LECs
claim that ISDN users will spent long periods online, and should
be charged astronomical prices. For example, Bell Atlantic, NYNEX
and US West want fees from 2 to 6 cents per minute just to make
a local call. Bell Atlantic's flat rate offering is $249 per
month, about twenty times the cost of a POTS line.
- High usage fees are economically inefficient. The largest
portion of the costs are fixed, and do not change with
usage. The lion's share of the cost of the service is to maintaining
the quality of the existing telephone lines that run from the
head office to your home. While increased usage may have an impact
on peak usage, the cost of increasing switch capacity has fallen
dramatically, and it now a small part of the cost of a telephone.
The cost of using the network when its slack (during evenings
and weekends) is effectively zero. The "cost" of using
the service 5 hours per day is nearly the same as using the service
5 minutes per day. A pricing system that is based largely on usage
fees is inefficient.
- CPT, Intel, AT&T, Compaq and others want the LECs to re-engineer
the network so it handles data traffic more efficiently. Consumers
want to maintain "open connections" to the Internet,
but do not need high bandwidth connections all the time. We need
mechanisms for "bandwidth on demand." The Regulators
need to push the LECs to do things that solve problems, and make
the network work for data. Right now there are so few ISDN consumers
that concerns about usage are a joke. We need more deployment
of digital technologies now, and we improve network architecture
as the technologies are deployed.
- There are a number of theories as to why LECs don't want to
market ISDN as a mass market residential service. Here are some
of the most popular:
- i) LECs want to sell second POTS lines. (A BRI ISDN service
provides the functionality of two POTS, including separate telephone
numbers). For example, in Utah the best usage option
for BRI ISDN service is priced approximately $10 above the cost
of two business POTS line.
- ii) LECs hope to offer high speed Internet services, bundled
with ISDN or ADSL services, and they do not want to provide a
low cost alternative over a common carrier platform.
- iii) LECs are concerned about cross-elasticity's between BRI
ISDN and other business services (such as US West's expensive
commitment to frame relay ), or to expensive residential multimedia
networks (most of which are still on the drawing boards).
- iv) LECs are concerned about high quality Internet telephony
delivered over ISDN or other digital home connections.
- v) In Utah, Scott Rafferty raised the general issue of centralization
of network intelligence, and the fact that high quality end to
end digital network connections allow this intelligence to be
decentralized, much of it into the highly competitive
market for customer premise equipment. This issue is analogous
to the PBX/Centrex issue.
- Of course, incompetence is also possible.
- The technology is mature. Let's let the genie out of the bottle
and see what it can do.
updated June 20, 1996
To see pleadings for CPT and others on this topic, see http://www.cptech.org/isdn.html
Corrections or suggestions to James Love.
This page has been accessed
times since June 17, 1996.