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I. Introduction II. Background
III. Issues
Reclassification of LEC-Owned Payphones Nonstructural Safeguards for BOC Provision of Payphone Service Ability of BOCs to Negotiate with Location Providers on the Presubscribed InterLATA Carrier Establishment of Public Interest Payphones
Other Issues
IV. Procedural Matters
Appendix A
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APPENDIX FINTERIM COMPENSATION OBLIGATIONS
September 20, 1996
Separate Statement of Commissioner Rachelle B. Chong In the Telecommunications Act of 1996, Congress mandated twin goals for a restructuring of our nation's payphone industry. Congress directed the Commission to establish rules that "promote competition among payphone service providers and promote the widespread deployment of payphone services to the general public." In this order, we effectuate Congress' intent by putting in place a new market-oriented scheme governing payphones. Thus, competition now becomes the new coin of the realm for the payphone industry. I write separately to show my strong support for the new policies we unanimously adopt today. In my view, these innovative policies will strip away outmoded regulations, unleash competitive forces upon all segments of the payphone industry, and put in place a mechanism to preserve the continuing availability of payphones that serve the public interest. The payphone industry is one in which competition with its attendant consumer benefits can easily thrive. However, our current payphone regulations were not crafted in a way that promoted regulatory parity between the market players or put a high premium on consumer protection. Under the statutory and regulatory framework that was in place prior to the 1996 Act, payphone providers were subject to different regulations whose application mainly depended upon whether an entity providing payphone service was a local exchange company or an independent payphone provider. For example, local exchange companies traditionally had the ability to subsidize their payphone operations with telephone service revenues and were restricted from choosing long distance providers on their payphones. In contrast, independent payphone providers had to support their operations mainly from revenues received at payphone stations and through commission arrangements with operator service providers. This disparate treatment created certain incentives and distortions in the market that, during the past decade, resulted in supracompetitive rates at certain payphones and in consumer confusion. As the rest of the telecommunications industry moves swiftly into a new pro-competitive, deregulatory era, our payphone regulations cried out for revision. In this order, we dismantle the existing regulatory system by putting in place rules that in essence will establish a new competitive payphone industry. These rules are designed to remove existing subsidies, provide for nondiscriminatory access to bottleneck facilities, ensure fair compensation for all calls originated on payphones, and allow all competitors equal opportunity to compete for essential aspects of the payphone business. At the heart of our new policies is that we have agreed that the best way to ensure fair compensation for payphone service is to let the market set the price for individual payphone calls. In this order, we establish a two-stage process as a transition to market-based rates. During stage one, or during the first year after this order becomes effective, local exchange companies are required to terminate subsidies for their payphones and are not be eligible to receive compensation for non-coin calls made on their payphones until such subsidies are terminated. Independent payphone providers, however, will begin to receive compensation for access code calls and subscriber 800 calls on a flat-rate basis. In addition, during this first stage, the states may continue to set the local coin rate but may move to market-based local coin rates at any time during this one-year period. The states are asked to conduct an examination of payphone regulations to review and remove any regulations that affect competition. In stage two, which will commence one year after this order becomes effective, carriers to whom payphone calls are routed must have in place a per-call tracking capability and are required to remit per-call compensation to payphone providers, including local exchange carriers. In this stage, the market will set the rate for local coin calls and we establish a $.35 default compensation rate that interexchange carriers will pay to payphone providers for each compensable call. After the conclusion of the second stage, the market-based local coin rate at these payphones will be the default compensation rate for all compensable calls in the absence of an agreement between the payphone provider and the carrier-payor. Thus, in two years, with certain limited exceptions, we can look forward with confidence to competition -- rather than regulation -- determining calling and compensation rates in the payphone industry. We also retain the discretion to review the deregulation of local coin rates nationwide and determine whether marketplace disfunctions in certain locational monopoly areas -- such as airports or train stations -- exist and should be addressed. If a problem arises, we will stand ready to step in and resolve any problems. In deciding to rely on market forces, however, we have also refocused on consumers. I am pleased that we have put in place several safeguards to ensure their protection. We do so in light of the fact that payphones serve an important role in allowing people to place calls when they are away from home or the office. We require that all payphones must provide free access to dialtone. Further, our new rules require that payphone providers must prominently display the local coin rate they choose to charge at each payphone, so that consumers will have full information about the charges and can make an informed choice to use the payphone. Payphones located in isolated or remote areas also serve as critical links to help when a person is faced with an unexpected emergency. In circumstances where the free market may not adequately encourage the deployment of payphones in locations that would serve public health, safety, and welfare needs, we establish guidelines by which the states may maintain and fund such public interest payphones. Under our order, states will be able to use their knowledge of local conditions to ensure that the public has access to telecommunications by requiring the maintenance of payphones at locations, such as along remote stretches of a rural road or on a county beach, that may not be economically self-supporting in the free market. Our order also requires that every payphone provide free access to both emergency services and to telecommunications relay service (TRS) calls for the hearing disabled. I believe it is appropriate for the states to take the lead on public interest payphones in their states. I look forward to their good work in this area that is so fundamental to Congress' second goal in Section 276 -- the "widespread deployment of payphone services to the general public." |
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