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UCAN's ISDN Protest (fwd)

  ---------- Forwarded message ----------
  Date: Sat, 3 Feb 1996 11:29:16 -0800 (PST)
  From: Barry Fraser <fraser@pwa.acusd.edu>
  The following was filed with the CPUC on Friday.  Please post freely on 
  the net.
  Michael Shames, Esq.
  Lisa Briggs, Esq.
  Barry D. Fraser, Esq.
  Utility Consumers' Action Network
  1717 Kettner Blvd., #105
  San Diego, CA 92101
  (619) 696-6966
  In the Matter of the Application of     )   Application 95-12-043
  Pacific Bell (U 1001 C) for Authority   )    (Filed Dec. 5, 1995)
  to Increase and Restructure Certain     )
  Rates of its Integrated Services        )
  Digital Network Services                )
  _______________________________________ )
       On December 5, 1995, Applicant Pacific Bell ("Pacific") served
  an application to increase and restructure its rates for 
  Integrated Services Digital Network ("ISDN") services.  ISDN is a
  network platform for transmitting digital voice and data services
  at high speeds over traditional analog telephone lines.
       Pursuant to Public Utilities Commission ("Commission") Rule 8,
  UCAN protests the Application and requests that the Commission
  conduct an evidentiary hearing to address the issues set forth
  below, and provide any other appropriate relief.  As a consumer
  advocacy group and recognized intervenor in Commission proceedings,
  UCAN is concerned that the rate increases proposed in this
  Application will adversely affect California ratepayers.
       Specifically, Pacific requests that the metered charge for
  additional minutes of local daytime ISDN use be doubled from
  $0.0105 to $0.0210, that the current practice of waiving
  installation charges for a 2-year term agreement be eliminated, and
  that Centrex ISDN prices be increased by $8 per month. 
  Additionally, Pacific seeks to impose upon home ISDN users a
  metered rate of $0.0146 for each additional minute for evening use
  and $0.0084 for each additional minute for weekend use over and
  above an initial 20 hour cap.  Currently, home customers have
  unlimited, unmetered evening and weekend service.
       UCAN has several concerns about this Application.  First, the
  proposed rate increases will severely inhibit the development of
  advanced communications services in California.  Second, the rate
  increases will harm current ISDN users who have invested heavily in
  user-end equipment relying on Pacific's current ISDN rates.  Third,
  Pacific's specified reasons for requesting the rate increases are
  unconvincing and unsupported by sufficient evidence.  Finally, even
  if Pacific can show that it has incurred higher ISDN costs,
  imposition of metered charges for evening and weekend use is not
  the proper way to recoup those costs.
       As no service list has been established in this matter, this
  Protest and Request for Hearing will be served only upon the
  Applicant, Pacific Bell.  When a service list is established, UCAN
  will serve this Protest on the appropriate parties.
       Continuing advances in personal computers and communications
  technologies have improved the speed, accuracy, and volume of
  information transfer between remote sites.  These advances have
  made possible a variety of new interactive applications, including
  access to the Internet, remote access to Local Area Networks
  ("LANs") and Wide Area Networks ("WANs"), and simultaneous data,
  audio, video and multimedia information transfers.
       However, there are limits to the ability of traditional analog
  telecommunications lines to support such advanced services.  Many
  of these services become slow and inefficient over analog lines,
  even when accessed by the fastest available modems.  ISDN service
  allows the traditional copper wire infrastructure to support the
  high-speed and high-volume data transfer capabilities required by
  these advanced communications technologies.  ISDN is currently the
  only affordable way for small businesses and residential users to
  take full advantage of the advanced services now available.
       The Commission has acknowledged the benefits to be gained by
  California business and residential users from access to these new
  services.  In its Report to the Governor, Enhancing California's
  Competitive Strength: A Strategy for Telecommunications
  Infrastructure (November 1993), the Commission notes:
       Advanced telecommunications offers California the
       opportunity to gain competitive advantage in the global
       marketplace.  That advantage will strengthen our economy
       and create tens of thousands of jobs.  Expanded use of
       telecommunications will create new products and services,
       new businesses, new job opportunities and could increase
       the productivity of the state's businesses by billions of
       . . . 
       Many of the benefits will flow beyond the private sector
       to enrich our educational system; the health care sector;
       libraries; public safety organizations; and other
       important institutions. . . .  Equally important, public
       sector agencies and non-profit organizations can exploit
       advanced telecommunications to develop new and valuable
       services that would otherwise not be possible using
       traditional methods.
       Today, the ability to take advantage of these advanced
  technologies depends in large part upon affordable access to ISDN. 
  Pacific Bell's proposed rate increase, particularly its proposal to
  institute per-minute charges for off-peak usage periods, will
  prevent many residential and small business customers from taking
  full advantage of new telecommunications services.  UCAN expects to
  offer evidence that the proposed rate increases will cause some
  users' monthly bills to rise by more than $100.00.  This will put
  such services beyond the financial reach of many customers.
       Pacific itself has argued that ISDN price increases will limit
  access to advanced services by small businesses and residential
  users.  In a recent Petition for Waiver of a proposed monthly
  $3.00 increase in ISDN Subscriber Line Charges by the Federal
  Communications Commission ("FCC"), Pacific Bell made the following
       By waiving this rule, the public interest will be served
       since affordable and economic ISDN will be made available
       to the many small business, residence and large business
       customers who need an efficient and effective means of
       transmitting information, getting access to the Internet,
       and becoming users of the information highway.
       Unique circumstances exist in California which underscore
       how critical affordable ISDN is to our customers.  The
       federal Clean Air Act and the California Clean Air Act
       require air quality agencies to institute "Employer Based
       Employee Trip Reduction" regulations.
       . . . 
       Telecommuting--moving the work to the worker, rather than
       the worker to the work--is credited in each region as a
       commute alternative to carpooling, vanpooling or riding
       public transit.
       Millions of employees telecommute using the existing
       telecommunications network.  But many are demanding
       higher telecommunications speeds in order to be more
       productive.  Still others tell us they need high speed
       access to the workplace before they can even start
       . . .
       The natural disasters in California have also created a
       need for affordable ISDN.  The Loma Prieta Quake,
       Northridge Quake, Oakland Hills Fire and Sonoma County
       floods have all prompted an increased need to telecommute
       from home or from telecommuting hubs.
       . . .
       Pacific has also instituted an aggressive Education First
       initiative in order to encourage schools, libraries, and
       community colleges to use ISDN to gain access to the
       information superhighway.  In a state where public
       education budgets are severely strained, an increase in
       monthly charges could force schools to forgo this
       Clearly, Pacific recognizes the potential threat of a mere
  $3.00 ISDN price increase to the development and growth of advanced
  services.  Yet the company would multiply that very same threat
  many times over if it is allowed to implement the rate structure
  proposed in its Application.  
       It is a basic economic tenet that an increase in price will
  reduce demand for a product.  In light of the Commission's interest
  in developing access to advanced communications services and the
  recognized threat to development posed by Pacific's proposed rate
  increases, the Commission should grant this request for a hearing.
       Utilizing ISDN to access advanced services entails much more
  than simply purchasing ISDN service.  Home and business users must
  incur various additional costs, including purchase of computer
  terminals, modems, routers, and specialized software.  Users must
  subscribe with various service providers, which often require
  advance payments and long-term service agreements.  Small business
  and institutional users often must invest in LAN or WAN technology
  in order to successfully implement telecommuting, Internet access,
  videoconferencing, and other services.  These initial costs can be
  substantial, easily running into the thousands of dollars.
       ISDN users making these substantial investments have relied on
  the current Pacific price structure in developing their advanced
  services plans.  If Pacific is allowed to implement the proposed
  rate increases, many small business and residential users may be
  forced to limit or even cancel their ISDN service, and incur large
  losses due to these high start-up costs.  UCAN will provide
  testimony that many users, especially those who have invested
  thousands of dollars in LAN and WAN technology, will be
  substantially harmed by the price increases imposed by this rate
       Because of this potential for substantial harm to customers
  who have made investments in end-user technology relying upon the
  current costs of ISDN service, the Commission should grant this
  request for a hearing in this matter. 
       Pacific seeks to increase ISDN rates because it claims to have
  erred with respect to two assumptions when initially calculating
  ISDN tariffs.  First, Pacific claims that higher percentages of
  ISDN customers than originally anticipated live more than 15
  kilofeet from the central office.  Second, the company claims that
  a minority of users are "maximizing their usage on evenings and all
  weekend long."  Calls during such periods are currently not
  subject to metered charges.
       Pacific argues that these two miscalculations have resulted in
  actual ISDN costs exceeding current revenues.  However, the company
  provides little evidence to support this claim in its application. 
  Since Pacific's actual cost studies were submitted under seal and
  are unavailable to UCAN, it is impossible to determine whether any
  rate increases are justified.  Despite this limitation, UCAN
  expects to provide testimony from expert witnesses which will show
  that Pacific's reasoning in this matter is flawed.
       First, Pacific receives a substantial financial benefit from
  increased ISDN usage, which more than offsets any additional costs
  incurred by this increased use.  ISDN customers make more efficient
  use of the existing telecommunications infrastructure by
  transporting more data at higher speeds without having to
  physically expand the system's capacity.  Thus, ISDN use actually
  saves Pacific substantial costs which might otherwise be incurred
  to perform extensive upgrades to handle the same amount of data via
  analog methods.  This benefit outweighs any additional costs that
  Pacific failed to factor into its existing tariff.
       Second, Pacific's claim that excessive usage during off-peak
  time periods has increased its costs is unconvincing.  Off-peak use
  of ISDN simply makes more efficient use of telecommunications
  infrastructure that would be sitting idle as excess capacity during
  these time periods.  The total required capacity of ISDN plant is
  determined by the level of business-day peak demand.  Customers
  using ISDN during these peak times justifiably bear the cost of the
  high capacity infrastructure (through metered charges for these
  peak times).  However, during off-peak times, the incremental cost
  for supplying ISDN connections is much lower.  Users who arrange
  their schedules to take advantage of off-peak evening and weekend
  rates should not be required to subsidize the costs required to
  maintain the infrastructure at peak capacity.
       Pacific's specified reasons for requesting these rate changes
  are unconvincing and insufficient.  Therefore, the Commission
  should grant this request for a hearing to determine whether
  Pacific's actual costs exceed its estimated costs for ISDN service,
  and if so, whether these additional costs are substantial.
       Pacific claims that actual ISDN service costs are higher than
  current revenues under the existing rate structure.  Even if the
  company can establish that a price increase is justified, there is
  no evidence that a per-minute charge for local ISDN calls made in
  low-peak time periods is the proper way to recoup those additional
       One of Pacific's arguments seems to be that users who
  establish connections with advanced service providers tend to leave
  these connections open continuously during off-peak time periods. 
  However, UCAN expects to produce evidence that leaving these lines
  open takes advantage of other efficiencies, and actually costs less
  than making repeated calls to a service provider.
       The nature of many advanced communications services, such as
  Internet access, often requires lengthy connections to various
  service providers.  However, the line may not actually be in use
  for a large part of this time.  Services such as the World Wide Web
  ("Web") allow the user to "download" large text and data files and
  search them on the user's computer device.  During this search
  period, although there is a connection established between the user
  and the service, there is no actual transfer of information through
  the lines.  The cost of maintaining such an open line is low
  compared to a line maintaining a continuous flow of information.
       The current rate structure which allows unlimited usage for
  off-peak times encourages users to take advantage of Web services
  while maintaining an open line with the service.  However, if
  metered charges are imposed for these off-peak time periods, users
  might be encouraged to repeatedly connect and disconnect with their
  service provider in order to reduce their per-minute costs.  This
  continuous dialing and redialing is less efficient than leaving a
  line open continuously for a period of time.  This practice will be
  awkward and time-consuming for the ISDN customer, and may actually
  result in increased costs to Pacific.
       Additionally, Pacific proposes a set of "toll discount plans"
  designed to "mirror the pricing on applications such as Internet
  access services."  These packages set up a fixed discount for
  purchasing a specified amount of service in advance.  Pacific
  evidently seeks to equate its ISDN service with services offered by
  Internet Service Providers ("ISPs") employing similar types of
  pricing plans.  
       However, Pacific provides no evidence that its ISDN services
  are comparable to Internet access services.  In fact, many
  significant differences exist between these types of services. 
  ISDN is primarily a switching and transmission technology, while
  ISP service includes access to a "client server," essentially a
  computer which can link the customer to various Internet services. 
  Pacific offers absolutely no evidence that these two diverse types
  of services should be priced similarly.
       The Commission should grant this request for a hearing because
  there is substantial evidence that Pacific's proposed rate
  structure will actually encourage activity which is less efficient
  and creates higher costs than current usage.
       For the foregoing reasons, UCAN requests the following: 1)
  that Pacific hold an informational workshop to explain specifically
  the necessity of these proposed rate increases; 2) that informal
  meetings with the parties be conducted to discuss a resolution of
  these issues; and 3) if these meetings do not lead to resolution,
  that a hearing be held in the above proceeding to determine the
  advisability and necessity of these rate increases, and if such an
  increase is actually required, to determine whether Pacific's 
  proposed tariff is indeed the most efficient way of recovering the
  costs of providing ISDN service.
  DATED: Friday, February 2, 1996
                                          Respectfully Submitted,  
                                          Michael Shames, Esq.     
                                          Lisa Briggs, Esq.        
                                          Barry D. Fraser, Esq.    
                                          Attorneys for Utility    
                                          Consumer's Action Network
  * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
  *Barry D. Fraser, Esq.                  fraser@acusd.edu        *
  *Electronic Communications Advocate     619-999-7596 voice mail *
  *UCAN                                   619-696-6966            *
  *1717 Kettner Blvd., # 105                                      *
  *San Diego, CA 92101                                            *
  * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *