CPT on Intel's motion in WA ISDN case

[James Love <love@tap.org>]

  here is what we filed the WA State ISDN proceeding in response to Intel's 
  motion to intervene on the notice issue.  jamie (love@tap.org, 202/387-8030)
  
  
  
                  BEFORE THE WASHINGTON UTILITIES
                   AND TRANSPORTATION COMMISSION
            
  
  WASHINGTON UTILITIES AND      )
  TRANSPORTATION COMMISSION     )   Docket No. UT-950200
                                )                    
             Complainant,       )
                                )
                  v.            )
                                )
  US WEST COMMUNICATIONS, INC., ) 
            Respondent.         )
  
   
       CONSUMER PROJECT ON TECHNOLOGY'S LIMITED INTERVENTION
       TO RESPOND TO INTEL'S MOTION FOR CONTINUANCE/DEFERRAL 
              OF US WEST'S ISDN RATE INCREASE PROPOSAL
  
       The Consumer Project on Technology (CPT)  was created by
  Ralph Nader in 1995 to represent the rights of consumers in the
  area of telecommunications and other issues.  A more detailed
  description of our organization can be found on the Internet, at
  http://www.essential.org/cpt.  We are active in efforts to
  prevent local exchange telephone companies from charging
  excessive prices for residential ISDN services.  Like a growing
  number of persons in the computer and telecommunications field,
  we believe that regulators have a important opportunity to vastly
  enhance public access to the information superhighway by insuring
  that residential ISDN services are widely deployed at reasonable
  prices.
  
       We recently learned that US WEST has pending before the
  Commission a proposal to revise its current flat rate ISDN tariff
  of $63 per month, and that the residential flat rate option would
  be increase to $184 per month.  We believe the rate increase is
  excessive and would stifle deployment of ISDN services.  ISDN is
  an important technology representing the next step in the
  evolution of the information superhighway, and US West's proposal
  would prevent ISDN from reaching its potential in opening up new
  services and telecommunication advances on the Internet.
  
       In addition to the grossly overpriced rate proposal, US
  West's tariff suffers from procedural irregularities.  US West
  failed to provide proper public notice of the ISDN rate proposal. 
  As a regulated public utility that wields enormous monopoly
  power, and proposes drastic rate increases in important services,
  US West should be required to adhere to strict compliance with
  public notice obligations.
  
       The public policy issues presented by the pricing of
  residential ISDN are extremely important.  ISDN is the most
  efficient way to provide the general public with immediate
  benefits in terms of a cost effective solution to higher speed
  access to the Internet.  Since residential ISDN can be delivered
  over the existing copper wire infrastructure, which consumers
  have already paid for, regulators have an opportunity to vastly
  enhance public access to the information superhighway to a low
  cost.  Greater access will result, however, only if US West is
  required to price the service in a just and reasonable way.
  
       US West has tried to avoid a separate notice on the ISDN
  issue. As a result, many persons who would have considered filing
  various types of motions or comments before the Commission on the
  residential ISDN tariff issue, never had an opportunity to do so. 
  Intel's suggestion that the broader computer, software, and
  online community be given a real opportunity to comment on and
  participate in the proceedings to modify the residential ISDN
  tariff correctly identifies these groups as those that are
  particularly important stakeholders in this matter.
  
       For these reasons, which are more fully discussed below, we
  support Intel's Motion For Continuance/Deferral of US West's ISDN
  Rate Increase Proposal. 
  
  I.  US West's Tariff Proposal is Overpriced 
  
       US West's rate increase from a flat rate of $63 per month to
  $184 per month is clearly excessive.  Several independent studies
  on the incremental cost of providing ISDN service conclude that
  the costs are much lower than the current US West tariff, and
  many times less than the proposed $184 per month.
  
  -    A 1993 study by the Tennessee Public Service Commission
       (TPSC) staff estimated the incremental cost of providing
       ISDN service to be $9.77 (per month), including right-of-way
       costs.  This study is described in detail in John Borrows'
       and William Pollard's "The National Regulatory Research
       Institute's Review of Tennessee's Integrated Services
       Digital Network Cost Studies," NRRI Quarterly Bulletin, Vol.
       15, No. 1, March 1994, pages 125-139.  The TPSC approved
       flat rate residential ISDN tariffs of $21 to $26 per month.
  
  -    In an earlier 1991 study, the Massachusetts Department of
       Public Utilities found that the "marginal cost" of ISDN
       service was $7.40 (per month) over the cost of POTS service.
  
  -    In studies for the Consumer Federation of America, Mark
       Cooper has estimated the marginal cost of an ISDN service
       (over the cost of POTS) to be $2 to $4 per line (per month),
       and falling.
  
  -    In an ISDN tariff currently pending before the District of
       Columbia Public Service Commission, the PSC Staff has
       undercut Bell Atlantic, Washington, D.C., Inc.'s tariff
       proposal by recommending a flat rate of $32 per month. 
       While we believe that even the D.C. Public Service
       Commission staff's recommendation is too high, it is more
       closely tailored to the real costs that will be incurred in
       providing ISDN service than the plainly excessive tariff
       submitted by US West.  It also demonstrates that far from
       entertaining US West's proposed increase, its current ISDN
       flat rate of $63 per month should be significantly reduced.
  
  -    Local Washington State software developer Bill Gates has
       also commented on this issue.  In his 1995 book, The Road
       Ahead, Gates recommends a residential ISDN tariff of less
       than $20 per month.  He says:
  
            ISDN was invented more than a decade ago, but
            without PC-application demand almost no one
            needed it. . . .  The [ISDN] line costs vary
            by location but are generally about $50 per
            month in the United States.  I expect this
            will drop to less than $20, not much more
            than a regular phone connection.  We are
            among companies working to convince phone
            companies all over the world to lower these
            charges in order to encourage PC owners to
            connect, using ISDN. (page 101).
  
       At present, the Washington US West ISDN flat rate tariff of
  $63 per month is roughly four times the cost of POTS.  This
  tariff is unreasonable.  The proposed changes in the tariff would
  result in tariffs as high as $184 per month for residential ISDN
  service --  more than ten times the cost of POTS.  Such a pricing
  proposal is a plain abuse of US West's monopoly position and
  against the clear weight of the evidence pointing to the
  relatively minor expenditures required to provide ISDN service.
  
       The Commission must decide this issue consistent with the
  independent studies and expert opinions noted, and encourage the
  broad deployment and use of ISDN as the next step in facilitating
  development of the information superhighway.  To decide otherwise
  and approve US West's rate hike would permit an abuse of monopoly
  power and unnecessarily stifle development of this important
  technology.   
  
  
  II.  US West Failed to Comply with Procedural Notice Requirements
  
       In pursuing its radical escalation of ISDN rates, US West
  has not complied with mandatory notice requirements.  This is a
  serious breach in any rate case before the Commission, but it is
  particularly egregious here considering the extreme rate increase
  sought by a monopoly.  The notice requirements of WAC-80-125
  applicable to US WEST's 300% proposed ISDN rate increase include
  a requirement that US WEST provide to the public a notice which
  "shall . . . set forth the amount of the proposed increase
  expressed in . . . total dollars and average percentage terms,"
  and "shall be prepared in such a manner as to attract attention
  to it and to distinguish it from other material simultaneously
  distributed.  A copy of such statement shall also be mailed or
  delivered to one newspaper of general circulation, and at least
  one radio station and at least 
  one television station, in the area or each of the areas
  affected.  The utility shall promptly file a copy of the
  statement with the commission and certify it has complied with or
  is in the process of
  complying with these mailing and delivery requirements."
  
       US WEST has not complied with any of these requirements with
  respect to its proposed 300% ISDN rate increase.  The Commission
  should not set a precedent that allows a waiver of these
  requirements for a monopoly utility, especially in the context of
  a proposed 300% rate increase.  The important procedural
  protections found in WAC-80-125 are in place to protect consumers
  from precisely this type of situation.  The Commission must not
  allow US West subvert the Commission's procedural requirements
  and install an outrageous rate increase at the expense of
  Washington's consumers.
  
  
  III.  Conclusion.
  
       As noted above, the Consumer Project on Technology fully
  supports Intel's request that the Commission order US WEST to
  issue the appropriate public notices as required by law, and
  defer the hearings on the ISDN issue in this docket, or
  investigate and review the proposed ISDN rates in a separate
  docket.  In addition, we applaud the Commission staff for
  establishing a mechanism to receive comments on the Intel motion
  to intervene by electronic mail (isdn@wutc.wa.gov).
  
  
  Date:  January 4, 1996
  
  submitted,
  
  
  Todd J. Paglia, Esq.
  Consumer Project on Technology
  P.O. Box 19405
  Washington, D.C.  20036
  voice     (202) 387-8030
  fax       (202) 234-5176       
  
  
  ----------------------------------------------------------------------
  James Love, love@tap.org
  P.O. Box 19367, Washington, DC 20036; v. 202/387-8030; f. 202/234-5176
  Consumer Project on Technology; http://www.essential.org/cpt/cpt.html
  Taxpayer Assets Project; http://www.essential.org/tap/tap.html