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CPT - VA ISDN proceeding
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INFORMATION POLICY NOTE
April 23, 1996 - ISDN pricing
- This was filed Monday in the Virginia ISDN proceeding. It gives
a more up-to-date statement of why we think it is important to
push for the conversion of the current analog telephone network
to one that is end-to-end digital.
- We are now also asking states to consider joint evidentiary
proceeding (with other states that have the same carrier), and
to require the local telephone company to report on ways to
modifying network software to give ISDN users "Bandwidth on
Demand," allowing for more efficient use of the "local loop"
network.
jamie
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
___________________________________
COMMONWEALTH OF VIRGINIA )
STATE CORPORATION COMMISSION )
)
Versus ) Case No. PUC950078
)
Ex Parte, in re: )
Investigation of the Pricing of )
Residential Integrated Services )
Digital Network Offered by )
Bell Atlantic-Virginia, Inc. )
___________________________________
The Consumer Project on Technology's Comments
on Bell Atlantic's ISDN Tariff,
Request for Extended Notice
on Bell Atlantic's New Proposed Tariff,
and Request for Joint Evidentiary Proceeding
I. INTRODUCTION.
1. The Consumer Project on Technology (CPT) submits the
following comments in opposition to Bell Atlantic-Virginia,
Inc.'s ("BA") tariff for the provisioning of Integrated
Services Digital Network ("ISDN"). CPT will address three
points:
a) The proposed tariffs are much too high, and will
harm consumers and independent providers of information.
b) On April 17, 1996, BA issued a press release
announcing new residential ISDN tariffs for Virginia.
Because these tariffs are substantially different from those
which were previously filed with the Commission, it is in
the public interest to extend the public comment period to
allow consumers additional time to comment on the new
tariffs.
c) We repeat our earlier request, from our January
11, 1996 comments in support of the staff's motion to
initiate and investigation into the ISDN tariffs, that
Virginia undertake a joint evidentiary proceeding with other
Bell Atlantic States that are investigating the Bell
Atlantic ISDN tariffs.
2. The Consumer Project on Technology ("CPT") was created
by Ralph Nader in 1995 to represent the rights of consumers
on telecommunications and other technology intensive
matters. CPT is a project of the Center for Study of
Responsive Law. A detailed description of CPT activities is
on the Internet at http://www.essential.org/cpt. CPT has
been very active in efforts to reduce ISDN prices
nationwide. Our Web page has a special section on policy
issues relating to ISDN pricing, which is located at:
http://www.essential.org/cpt/isdn/isdn.html.
CPT is also the sponsor of an influential Internet
discussion list on ISDN pricing, called ISDN, which is
available for subscription by sending a request to
LISTPROC@TAP.ORG. The archives of ISDN are available at:
http://www.essential.org/listproc/ISDN/
3. The Center for Study of Responsive Law and CPT are
located in Washington, DC. Many of our employees, including
James Love, the CPT Director, live in Virginia, and are
affected by the BA residential tariff.
II. WHY IS ISDN IMPORTANT?
4. At present most consumers are connected to the
telephone network through a system where calls are often
(but not always) originated or terminated as analog, the
switching and interoffice transport is typically digital.
With the deployment of ISDN technology, the telephone
network becomes end-to-end digital, and this is extremely
important, for several reasons. Perhaps the most obvious
reasons are that an ISDN connection will permit much faster
transfers of data files than analog modem, and a single line
can support two telephone numbers. However, the conversion
of the network into one that is end-to-end digital has many
other benefits, since this will allow computers to manage
network connections, and make it possible for a new
generation of information services.
5. ISDN is one of several technologies that can provide
residences with digital connections. ADSL and cable modems
are two other promising technologies. However ISDN offers
unique advantages. First, ISDN is a here-and-now technology
that can be used in nearly every home in the BA service
area. This simply isn't true for any other technology, and
won't be for many years. ISDN provides the only home digital
technology that is ubiquitous for residential consumers.
This is very important, because network externalities are
very important -- the value of having a digital connection
is determined in part upon who else has a digital network
connection. The economies of scale in producing applications
for digital network connections are also very important.
6. ISDN is deployed over the public switched network.
This is not necessarily true for cable modems or ADSL. The
public switched network is an extremely important and
valuable infrastructure that will be far more useful when
its is deployed as end-to-end digital.
7. The applications that work with ISDN today are
extensive and impressive, and include important innovations
such as high-speed Internet access, CD-Quality Sound, and
video-conferencing.
III. THE BA PROPOSED TARIFFS ARE TOO HIGH AND WILL HARM
CONSUMERS AND INDEPENDENT PROVIDERS OF INFORMATION SERVICES.
8. In our view, the failure to deploy ISDN broadly, a
mature and low cost digital technology, is a massive
failure by the Local Exchange Carriers (LECs). This failure
is due to the high prices charged by LECs. BA's proposed
tariffs are among the highest in the United States.
9. The initial tariff filed by BA requires ISDN customers
to pay hefty fees for every minute of use. These fees,
which are 4 cents per-minute from 7 am to 7 pm and 2 cents
per minute from 7 pm to 7 am, and far higher than BA's
costs. (Prices for 2B connection). Residential consumers
who have BA service have reported monthly bills of $126 to
more than $1,000, for local calls. (See, for example,
Attachment 1, Edmund Andrews, "A Steep Hurdle to Web
Shortcut: Fast Computer Access Lines Are Stumbling Over
High Prices," New York Times, March 25, 1996.) In filings
before the Washington, DC Public Services Commission, BA
indicated that it saw residential ISDN consumers as
"'computer-philes' with more than adequate resources to pay
as they go." (Attachment 2).
Similarly Situated LECs Have Far More Affordable Rates
10. CPT has surveyed many state ISDN tariffs. BA is among
the most expensive. LECs in several states offer much
cheaper residential ISDN service. For example, the Northern
Arkansas Telephone Company (NATCO) offers unlimited usage at
a flat rate of $17.90 per month. The Roseville Telephone
Company, the 23rd largest telephone company in the US, which
serves California's southern Placer County and northern
Sacramento County, sells residential ISDN at $29.50 for
unlimited usage. Four of the five Midwest states served by
Ameritech provide residential ISDN service in Illinois,
Ohio, Michigan, and Wisconsin for flat rates of $28 to $35
per month. The BellSouth residential ISDN tariff is flat
rate in every state, including Tennessee, where residential
ISDN service is $29.50 for unlimited usage. (See CPT ISDN
survey, Attachment 3).
11. In contrast, BA charges about $30 to $34 for ISDN
service, plus the per minute charges. The per-minute
charges are the problem with the BA tariff. These are an
attempt by BA to impose a tax on Internet usage. BA is
seeking to capture, through its usage charges, the perceived
value of Internet usage. As noted above, these per-minute
charges can run to more than a hundred dollars per month for
even moderate use of the residential service.
Cost Studies Indicate ISDN Costs Are Very Low.
12. A Study by the National Regulatory Research Institute
estimated that the incremental cost of residential ISDN was
less than $10 per month. (John D. Borrows and William
Pollard, "National Regulatory Research Institute's Review of
Tennessee's Integrated Services Digital Network Cost
Studies," NRRI Quarterly Bulletin Vol. 15, No. 1, March
1994, available on the Web at
http://www.essential.org/cpt/isdn/isdn.html). In the
Delaware residential ISDN proceeding Dr. Scott Rafferty has
estimated the incremental cost of residential ISDN to be 0
to $4 per month, and falling. (Attachment 4, Scott
Rafferty, "Direct Testimony," Delaware PSC Docket No.95-
014T, March 13, 1996). Available at
http://www.essential.org/cpt/isdn/isdn.html.
13. Bill Gates, Microsoft founder and ISDN enthusiast,
feels that reasonable ISDN is the most important
contribution telephone companies can make to the development
of the Internet (Infoworld Electric, Interview March 14,
1996) and that it should be priced at around $20 per month
(The Road Ahead, p. 101). Intel Corporation has testified
before utility commissions stating that ISDN should be
priced the same as POTS. (Attachment 5, Testimony of
Intel's Tad Hetu. Also on CPT Web site).
14. Other state regulatory commissions are considering
actions to protect ISDN consumers. In the Delaware PSC's
ISDN hearing, Dr. Scott Rafferty recommended that for the
first 200 hours of usage, ISDN be priced the same as POTS,
if ordered as a second line. The Delaware PSC staff
recommended a flat rate for ISDN of $28.02, after their own
review of the confidential BA cost studies. In the District
of Columbia, the Office of People's Council has similarly
recommended a flat rate of $32 per month. These tariffs are
far below those proposed by BA for Virginia, since BA is
seeking to impose hefty per minute usage charges.
15. In several states, Bell Atlantic has apparently argued
in the past that the cost of providing businesses with ISDN
Centrex voice service are only a few dollars per month more
than the cost of providing analog telephone service. The
Commission should take administrative notice of any such
cost studies for ISDN voice Centrex service that have been
filed in any Virginia tariff proceedings. It is our
understanding that BA has been talking out of both sides of
its mouth on ISDN costs - first arguing that the incremental
cost was quite low for voice Centrex services, and now
arguing that it will cost an arm and a leg for residential
consumers.
16. In a recent FCC proceeding, U.S. West estimated that
the monthly non-traffic sensitive cost of its telephone
lines was $17.34 for POTS and $18.52 for ISDN - a difference
of only $1.18 per month. (Attachment 6, U.S. West,
"Comments: in the Matter of End User Common Line Charges,"
FCC CC Docket No. 95-72, June 29, 1995, Appendix A.).
IV. BELL ATLANTIC CONFLICTS OF INTEREST.
17. There is a lot of speculation about Bell Atlantic,
Nynex, PacBell, and U.S. West's decisions to set such high
residential ISDN tariffs. Here are some reasons why BA may
want to discourage low cost ISDN service.
18. BA wants to market ADSL to residential consumers. BA
may claim that ADSL, which uses the copper wire
infrastructure, is a video dialtone or cable service, and
thus not regulated as a common carrier. If BA believes it
can do this, it may want to discourage low priced ISDN
deployment, because ISDN would reduce the sales of the non-
common carrier service. Many LECs, including BA, have
expressed preferences for non-common carrier platforms for
information services, since they can more easily exercise
control and market power over information service providers.
19. BA has indicated that it is extremely concerned over
Internet telephony. Since BA is seeking to become a long
distance telephone service provider, it may be attempting to
discourage ISDN deployment in order to prevent consumers
from using ISDN for Internet telephony with high quality
voice connections.
20. BA is among the LECs which are actively marketing
second lines to residential consumers. Because each ISDN
line can support two telephone numbers, and two simultaneous
telephone calls, BA has an incentive to discourage ISDN
deployment, in order to sell more analog telephone lines.
V. BA'S PROPOSED NEW ISDN RATES RELEASED APRIL 17, 1996 ARE
ALSO OVERPRICED, AND REQUIRE EXTENDED PUBLIC NOTICE FOR
COMMENT.
21. BA announced a new ISDN pricing package on April 17,
1996. As a preliminary matter, we urge the Commission to
institute a separate proceeding on the new proposal which
will facilitate the filing of comments by concerned parties
focusing directly on the new offering. Because the new
rates were announced only a few days before the comments on
the original tariff were due, a separate proceeding will
permit parties who have already filed comments to focus on
the new offering and provide the Commission with more
thoughtful feedback than is permitted with only a few days
warning.
22. In general, BA says it will offer a schedule of
possible tariffs from $23.50 to $249 per month, with the
same hefty per minute charges for usage which exceeds
"callpack" options. As before, the usage charges are based
upon each channel of usage, so a 128 Kbps connection will be
priced at 4 cents per minute from 7 am to 7 pm, and 2 cents
per minute from 7 pm to 7 am. While these rates are
considerably lower, over all, than the initial filing, they
are still excessive. Moreover, the tariff packages present
an awkward set of options, whereby consumers will be forced
to pre-pay for usage which they may or may not need, and if
they guess wrong and exceed the "callpack" option, they face
the very high per-minute charges again.
23. For every callpack option over 20 hours, the new BA
tariffs are clearly excessive. For example, the 60 hour
callpack option, which would in practice only be 30 hours of
2B usage, would cost 29 percent to 151 percent more than the
prices for unlimited usage by five LECs who offer service in
Arkansas, California, Ohio, Illinois, Michigan, Tennessee
and Wisconsin, and is about twice the rate that is being
considered for unlimited use in Delaware and the District of
Columbia. Virginia ISDN consumers should not be expected
pay rates which are several multiples of BA's costs.
VI. BA SHOULD BE REQUIRED TO REPORT TO THE COMMISSION ON
MECHANISMS TO INCREASE THE EFFICIENCY OF DATA TRANSMISSIONS,
INCLUDING SYSTEMS OF PROVIDING "BANDWIDTH ON DEMAND."
24. To understand how residential consumers might use ISDN
with today's applications, consider the following analysis
from one Motorola plant. Motorola looked at 75 persons who
did significant tele-commuting. They found that "for every
hour of time spent with an ISDN connection, 0.6 of the hour
is with both B channels open, 0.4 of an hour is with only
one B channel open." This was with a "time-out" for the
second channel which was "rather prompt." They found that
the average worker in the study used a BRI connection for 54
hours per month. But since this was for total clock time,
including the time when both channels were in use, and the
time when only one channel is in use, the time "billed" was
higher. Using the .6/.4 ratio, the total billable hours of
B channel usage under the BA pricing scheme would be about
86 hours. This would put the average user in the $60
callback plan, or more than four times the cost of POTS. Of
course, for some workers, the cost would have been even
higher.
25. As new applications for ISDN are developed, such as
video conferencing, ISDN delivered radio programs, or other
new services, one would expect new types usage patterns to
develop. In general, one hopes that the current
infrastructure would be re-engineered to more efficiently
accommodate its use for purposes other than the traditional
analog voice services.
26. While BA and some other LECs seem alarmed at the
prospect that consumers might actually want to use the
copper wire network for something other than 6 minute
telephone calls, we have heard nothing from these monopoly
providers to make the network more efficient. We believe
that most consumers are interested in maintaining "open
connections" to digital networks, in order to receive
various types of information in real time. However, for a
number of important uses, it is not necessary to constantly
use the entire bandwidth that is available. For example, in
Web surfing, much time is spent simply reading text on
pages, which doesn't require any bandwidth at all, since the
data has already been downloaded to the home computer.
Software exists, we are told, to allow ISDN users to
maintain connections through ISDN "D" channels, which are
apparently already open, and to open up B channels as
needed, in a Bandwidth on Demand (BoD) basis. We ask the
Commission to require BA to study various models for BoD,
and report back to the Commission with 9 months on the
feasibility and cost of such systems. This is very
important, and a much more constructive response to
potential congestion problems than charging per minute fees
on residential consumers.
27. For now, congestion by ISDN users is a non-issue. In
Maryland, BA was only able to attract about 300 residential
ISDN consumers as of last fall. In Virginia the number of
residential ISDN is also likely minuscule. The current
problem is the lack of deployment and the dearth of new
applications, not congestion. The Commission needs to prime
the pump now. While BA begins to connect more than a
trivial number of residential ISDN consumers, it can be
required to do something constructive about bandwidth
management. This will also give BA an incentive to solve
potential problems, rather than exploit them.
VII. THE COMMISSION SHOULD UNDERTAKE JOINT EVIDENCIARY
PROCEEDINGS WITH OTHER BA STATES.
28. As a consumer group, we are overwhelmed by the
difficulty and cost of developing a separate record on ISDN
pricing in every state. For the most part this is wasteful,
and only benefits BA. CPT petitions the Commission to
undertake joint evidentiary proceedings with the other BA
states. CPT offered this suggestion in our earlier
comments, and we repeat it today. This would benefit
consumers greatly. Our Attachment 7 is an April 2, 1996,
letter from Dhruv Khanna, Senior Attorney for Intel
Corporation, to Robert Rowe, Chairman of the Montana Public
Service Commission, regarding multistate administrative
hearings. This letter includes exhibits, including a legal
analysis and proposal to proceed with a multistate
proceeding which could be modified for the BA states.
VIII. CONCLUSION.
29. The Commission must require that BA price ISDN with the
cost of providing the service in mind. We agree with the
recommendation that Dr. Rafferty made in the Delaware
proceeding. Dr. Rafferty recommended that ISDN be priced
the same as POTS if ordered as a second line, since second
lines are apparently already a large profit center for the
LECs. Dr. Rafferty would permit usage charges if a consumer
used more than 200 hours of 2B use per month, however, he
would cap those charges at the incremental cost of a full
time connection. The Delaware PSC staff recommendation that
usage charges be capped at $1.60 per month also seems
reasonable.
April 19, 1996
Sincerely,
__________________ _______________________
James Love Todd J. Paglia
Director Staff Attorney
Consumer Project on Technology
P.O. Box 19367
Washington, DC 20036
202/387-8030
http://www.essential.org/cpt
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