Phone Industry Targets Access Bill : Law Would Prevent Passing on Some Fees to Customers

The telephone industry will be lobbying in Sacramento this week in an effort to ensure that consumers begin paying part of the $1.3 billion that local phone companies now charge long-distance carriers for completing their calls.

The industry is voicing strong opposition to Assembly Bill 550 by Gwen Moore (D-Los Angeles), which cleared a major hurdle last week when the Assembly Ways and Means Committee approved it on a 12-8 vote, clearing the way for a floor vote this week.

The bill would prohibit the Public Utilities Commission, at least until 1988, from shifting to residential telephone customers about one-third of the so-called access charges that long-distance carriers are expected to pay California’s local telephone companies this year for connecting them with local customers.

Making up for Lost Revenue

Committee approval of the ban followed a Public Utilities Commission ruling June 12 ordering Pacific Bell to reduce the fees it charges long-distance carriers for providing access to its local network by $140 million this year--about 11% of the total bill. The lost revenue would be made up by adding a 3.15% surcharge on the monthly bills of Pacific Bell’s residential customers, adding about 25 cents to the present $8.25 basic rate.

In addition, General Telephone is to lower its access charges by $7.5 million and collect that amount instead from its customers through a 0.55% surcharge, about 5 cents.

In addition, the PUC decision requires long-distance carriers to reduce their intrastate tolls proportionately. Thus, while local customers will pay slightly more for basic service, long-distance customers will realize some savings.

That shifts a total of $147.5 million this year--if the PUC decision stands.

As the Moore bill cleared Ways and Means, it would not necessarily rescind the PUC action because it makes no mention of retroactivity. But the bill would clearly ban any future cost shifts to consumers until at least January, 1988. The PUC decision indicated that about one-third of the $1.3-billion access bill paid by carriers will be shifted to residential customers over seven years, with the second step scheduled for next January.

Moore’s bill also would direct the PUC to study the effect of the new $1 monthly access charge imposed on all residential phone customers by the Federal Communications Commission, a charge that is to double next June. It also orders the PUC to exempt the state’s poorest households from paying any part of the FCC fee.

(Under the PUC order, so-called lifeline customers--households with annual income of less than $11,500--would pay 50 cents instead of $1. Their basic rates are pegged at half those of regular residential customers under subsidies provided by a 4% tax on the intrastate revenues of long-distance carriers. That fund now has a substantial surplus.)

The PUC ordered the cost shift with great reluctance. President Donald Vial called it “the bitter fruit of national policy” and predicted that “a lot of low- and moderate-income families and small-business people are going to gag a little.”

But the telephone companies--both long-distance and local--dispute that contention, calling Moore’s bill “wrong-headed” and “anti-consumer.”

Both Pacific Bell and General Telephone oppose the bill even though passage will not result in a loss of revenue. They worry that in the longer term it will hurt them by encouraging major customers to build private telecommunications systems bypassing their own networks and take with them huge chunks of revenue.

Opposition also includes the state’s major long-distance companies--AT&T; Communications, MCI and GTE Sprint--which consider the access charges excessive and unfair to their customers. Also opposing the measure, not surprisingly, is the PUC.

Supporting the measure is the San Francisco-based consumer group TURN (Toward Utility Rate Normalization), whose executive director, Sylvia Siegel, called the committee vote “lovely.” She maintains that the phone companies and carriers have yet to document the reality as well as the extent of the “bypass threat.”

Few Benefits

In addition, Siegel said, a large proportion of the state’s residential customers use long-distance service sparingly and would benefit little if at all from reduced toll rates while paying more in basic service charges.

The long-distance carriers, the local phone companies and Moore agree that the present access charges paid by the carriers are far greater than the local companies’ cost of providing local connections for long-distance service. Maintaining excessive toll rates in an era of competition and a deregulated long-distance market will induce the biggest customers to build private systems to bypass the local network, the industry argues.

Were a massive revenue loss to occur because of such bypassing, they say, residential customers and small businesses would be left to foot a far greater share of the cost of the public network. This, it is said, would send their bills into orbit and put basic telephone service beyond the reach of many who need it, contrary to federal communications policy that phone service should be universally affordable.

But, Moore argues, long-distance rates have always subsidized basic local service in support of that policy.

“There are other alternatives the commission didn’t consider,” Moore said in an interview. “The last alternative ought always to be to impose these charges on the end users.”

Without specifying these alternatives, Moore said the commission could offer no figures to support what is called the bypass issue and no evidence to show how many customers would be deterred from building private phone systems because of the $147.5-million shift.

Back to Drawing Board

“I don’t permanently ban it (the cost shift to consumers),” she said. “My bill puts a moratorium on it and says to go back to the drawing board and take another look at it.”

She added that, while the initial shift might add just 25 cents to Pacific Bell bills, by 1993 that sum would grow to about $3.25. The FCC-imposed charge by then will be at least $2 a month, meaning that local customers would be paying $5.25 for “access” to a long-distance network that many of them rarely use.

Defending the PUC decision, Commissioner Frederick R. Duda said in an interview: “We made a very small shift and retained jurisdiction to change the amounts over the (seven-year) period if we find that ‘bypass’ is less than we anticipated. We took a very conservative position on that.”

Pacific Bell and General Telephone spokesmen carefully worded their opposition to the Moore bill, praising the “laudable intent.” More outspoken was Eugene Eidenberg, president of MCI’s Pacific division.

“The motivation is fine,” he said in an interview, “but this is probably the most significant anti -consumer legislation this session. This bill would guarantee very large-scale ‘bypass’ in the state of California. It’s just wrong-headed.”

Eidenberg said MCI plans to contact all 80 Assembly members before the floor vote on AB 550, which is not expected before Thursday. Pacific Bell’s lobbyists will be out in force as well, said spokesman Doug Cambern.

“Well, they contacted every member of the Ways and Means Committee,” Moore said, “and it passed 12 to 8.”

Because the measure would take effect immediately on being signed, it requires passage by a two-third majority in each house.