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Executive Director Senior Staff Attorneys
Thomas W. Weeks Michael R. Smalz
Linda Cook
Staff Attorneys
Director Joseph Maskovyak
Eugene R. King Sarah E. Biehl
Before the House Agriculture and Natural Opponent Testimony on Telecommunications Provisions of House Bill 490
Presented by: Michael R. Smalz, Ohio Poverty Law Center Appalachian Peace and Justice Network (APJN)
November 14, 2014
Good morning, Chairman Hall, Vice Chair Thompson, Cera, and Committee members. My name is Michael Smalz. I am a Senior Attorney with the Ohio Poverty Law Center (OPLC). OPLC is a nonprofit statewide legal aid office whose mission is to advocate for, protect and enforce the legal rights of low-income Ohioans. I am testifying on behalf of OPLC and the Appalachian Peace and Justice Network (APJN). APJN is an Athens County-based community organization including over 200 (largely low-income) residents of southeastern Ohio who advocate, inter alia, for fair rates and strong consumer protections for residential consumers in southeastern Ohio. Since 1996, I have represented low-income clients and community-based organizations—including APJN and the former Appalachian People’s Action Coalition (APAC)—in a wide range of cases and rulemaking proceedings before the Public Utilities Commission of Ohio (PUCO). Security deposit rules. I am also a current and longstanding member of the PUCO Statewide Lifeline Advisory Board.
We oppose the telecommunications amendment to HB 490 (MBR) which would allow AT&T and other major telephone companies in Ohio to withdraw their basic landline service to Ohio telephone customers, and we urge this Committee to reject and remove those provisions from the MBR. These provisions are both unnecessary and harmful to Ohio consumers, especially low-income, rural and elderly Ohioans.
FIRST, these provisions are unnecessary because the ILECs already have available to them a simple and expeditious procedure to apply for and obtain a waiver allowing them to withdraw basic local exchange service (BLES), and thereby terminate their COLR responsibilities. It is set forth in R.C. 4927.11(C) and, in more detail, in Ohio Admin.
Code 4901:1-6-27(G).
This PUCO rule provides a relatively simple fast-track mechanism for an ILEC to obtain PUCO approval to terminate its BLES service. The Commission must issue an order granting or denying the company’s requested waiver within 120 days of the filing of the company’s application. There is no requirement for an evidentiary hearing or formal discovery by opposing parties. There has to be one newspaper notice and one public hearing, and the Commission may require that notice be provided to the affected customers.
The Commission must grant the company’s requested waiver if, upon investigation, it finds the waiver to be just, reasonable, and not contrary to the public interest, and that the applicant demonstrates a financial hardship or an unusual technical limitation.” Therefore, the Commission would have the opportunity to examine the factual merits of each company’s waiver request (on a company-by-company basis) and, in particular, any competing claims of financial hardship to the company and the detrimental impact on the company’s customers. The Commission could draw on its own technical expertise and its role as a neutral arbiter in making its waiver determination. If the companies are actually losing money on providing service to BLES customers, they should be able to provide data to the PUCO supporting that assertion. At the same time, the Commission could evaluate whether there are adequate alternatives throughout the targeted phone exchanges, and not just somewhere in each of those exchanges.
Furthermore, if the legislature believes that the PUCO waiver proceeding is too much of an obstacle for the companies, I would recommend that the legislature further refine that procedure or provide more specific guidance to the PUCO concerning the waiver procedure, rather than giving blanket approval to the abandonment of BLES service by the ILECs, as proposed in the current version of SB 271.
SECOND, the ILECs are not losing money on BLES and BLES is not being subsidized by other services. If the companies were losing money on this service, they would file a rate case. Also, companies that are serving very rural, sparsely populated areas can access the federal Universal Service Funds for high-cost areas.
Just because basic local service may not be making us much of a profit as other services does not mean that it is subsidized and not covering its incremental cost. In utility practice, the definition of a subsidized service is that its revenue (or price) does not cover
the incremental cost. Where the local loop infrastructure is already in place, the revenue from BLES almost certainly covers (or more than covers) the incremental cost of providing BLES.
Moreover, there are many services which use the same local loop infrastructure used by basic local service. These include vertical services such as call waiting, caller ID, intercarrier services, and Internet services. All of these service revenues should be taken into consideration when determining whether basic service is subsidized.
This could leave some customers with the worst possible scenario from an economic standpoint—an unregulated monopoly provider with neither competition nor regulation to protect consumers.
THIRD, the enactment of the telecom provisions in HB 490 could seriously jeopardize the availability of Lifeline service for low-income landline customers. Under current FCC regulations, ILECs that accept federal universal service funds for Lifeline programs must offer basic local phone service to qualify for the funding. It appears that current FCC regulations would either block telephone companies from withdrawing their regulated basic telephone service or, alternatively, induce those companies to terminate their Lifeline programs in order to facilitate their withdrawal of basic landline phone service. In fact, AT&T has already petitioned the FCC for permission to terminate its Lifeline program.
State law governing the operation of the Lifeline program also conflicts with the provisions of SB 271. R.C. 4927.13(A)(1) requires that an ILEC that is a Lifeline provider shall offer flat-rate, monthly, primary access line service at a discount to the “monthly basic local exchange service rate” that provides for the maximum contribution of federally available assistance. However, if an ILEC abandons basic local exchange service, then the companies can no longer apply the discount, or even determine what the discount should be, because there would no longer be any basic local exchange service rate. HB 490 does not spell out how to resolve this conflict.
FOURTH, consumers lose. The termination of the ILEC’s COLR responsibilities means that the companies would no longer have to furnish service to customers on a non-discriminatory basis. Customers with basic local service would lose the quality of service standards, including protections from lengthy service outages, unreasonable bill payment timelines, customer credits, and disconnection and reconnection requirements. Even
worse, those customers who subscribe to basic phone service because they cannot afford anything beyond basic service, will lose access to affordable phone service or, at the least, access to flat rate unlimited local phone service. In many ways, phone service is more of a necessity nowadays than in the past. Phone service is essential to communicating not only with one’s family, friends, medical and social service providers, and law enforcement agencies, but many administrative hearings, meetings with social workers or counselors, legal consultations including legal aid intake and client interviews, and trial preparation are now conducted by phone. Loss of phone service—or the substitution of limited-minutes cellphone service—may leave people without adequate and affordable telephone service. Elderly, low income and rural customers, and large households are especially vulnerable.
The bottom line is that many customers who lose their landline service will end up in one of three situations: (1) with no phone service; (2) with inadequate phone service, or with unaffordable phone service. None of these outcomes are fair to the affected customers or serve the public interest.
FIFTH, the FCC is planning to release a Notice of Proposed rulemaking at its December 2014 open meeting to address Tech Transitions, including an investigation and solicitation of comments on the possible retirement or selling of copper networks, 911 reliability and a wide range, of other issues pertaining to possible further telecom deregulation. Ohio shouldn’t jump the gun on allowing a telephone provider to retire its services when the FCC is investigating the impact of the deregulation trend nationally. The FCC thinks these issues are important enough to require thorough exploration and investigation. AT& T cannot turn around and say” the FCC is taking care of it so let us do what we want in Ohio.” The more prudent course of action is to await the outcome of the FCC’s investigation and rule making proceeding.
Finally, it is worth noting the ILECs, when they testified on a prior telecom deregulation bills (S.B. 162 and HB 276) stressed that they were not advocating elimination of all regulations protecting BLES customers. For example, Jon F. Kelly of AT&T emphasized that [HB 276] “provides a ‘safety net’ for consumers whose only need or desire is for plain old telephone service, provided by the telephone company that has served their community for 100 years.” Let us not abandon these customers.
For all of the reasons I have discussed, we urge the Committee to reject the telephone-related provisions in HB 490. This is not a simple or modest bill. It radically changes
Ohio law in its intent, scope and customer impact. The ILECs should be allowed to withdraw BLES if, but only if, they can persuade the PUCO on a company-by-company basis that the continued provision of BLES is financially harmful to the companies and that such a step is not contrary to the public interest.
Thank you for your consideration. I am happy to answer any questions.
