ISDN Pacific Bell Protest Letter (fwd)

[James Love <love@tap.org>]

  -----------------
  Date: Tue, 20 Feb 1996 17:47:53 -0800
  From: J Sylla <jsylla@westworld.com>
  To: love@tap.org
  Subject: ISDN Pacific Bell Protest Letter
  
  I came upon your ISDN page.  FYI following is my letter sent to California
  PUC.  If you are inclined to upload the letter, or redistribute, please
  feel free.
  
  
  [letterhead]
  John R. Sylla  [jsylla@westworld.com]
  [address and phone omitted]
  
  
  31 January 1996
  
  
  California Public Utilities Commission
  505 Van Ness Avenue
  San Francisco, CA 94102
  
  Att: Public Advisor's Office
  
  Reference:              Pacific Bell ISDN Application No. 95-12-043
                                  filed December 5, 1995
  
  Dear Commissioners:
  
  I write on my own behalf as a Pacific Bell Home ISDN subscriber to
  urge the Commission not to approve the rate increases proposed in
  the above filings.
  
  The California public, particularly the high value adding "knowledge
  worker" professionals most likely to be early adopters for ISDN,
  should not be subjected to a "bait and switch" gambit on ISDN
  pricing.
  
  Unlike most any other rate issue the Commission is likely to face, this
  proposal negatively affects a broad class of individual consumers in
  a compounded, leveraged way.  Many consumers like me have
  already directly and expressly relied on current tariffed rates to
  spend hundreds if not thousands of dollars on ISDN terminal
  equipment.  Will the Commission allow that reliance to be
  invalidated?  To raise rates now would penalize early adopters and
  could undercut confidence in the tariff system, with implications for
  both innovation and investment in technology, business and job
  creation in California.
  
  While the local loop market is not presently competitive, consumers
  increasingly benefit from vigorous competition amongst, for
  example, ISDN equipment vendors and ISDN-friendly Internet
  Service Providers.  These elements and ISDN services together,
  rather than separately, make up the "product" we consumers decide
  whether to buy.  Until there is viable competition for high speed
  digital services in the local loop, the consumer surplus resulting from
  competition in other areas should not be given away as a revenue
  opportunity for a market-dominant carrier.
  
  On the matter of "costs," if a carrier claims it isn't making its desired
  profit on ISDN because of incorrect cost assumptions, it should not
  use its regulated position to alter the pricing premises after the fact.
  Compare an ISDN equipment vendor that fails to make its desired
  profit because its costs exceeded expectations: it can't just ask the
  government to help it charge its customers more.  The carrier should
  not avoid the deal that public consumers relied on, nor appropriate
  the beneficial consumer surplus enjoyed in the competitive equipment
  portion of the overall "product" consumers decided to buy.
  
  More perilous, revising the pricing of ISDN could neutralize
  unforeseen but beneficial cross-tariff competition between the
  carrier's own service offerings (for example, to disfavor intelligent
  customer premise equipment that competes with or bypasses
  otherwise bundled, central office implemented services.)  I strongly
  urge the Commission to request and study information on potential
  indirect cross-tariff effects, which are in some ways the flip-side of
  cross-subsidization.
  
  In other words, what is the effect of an ISDN price increase in the
  markets for other carrier services (e.g., Custom Calling Services,
  leased lines, Centrex, voicemail, Automatic Number Identification
  [whether or not bundled with 800 service], etc.)?  And what is the
  effect on innovation by venture companies and their products (e.g.,
  ISDN equipment and even advanced private services such as off-site
  receptionist/answering service implementations)?
  
  For ISDN to reach critical mass in California, the price should not
  belatedly be increased on the theory of allowing faster installation
  cost recovery by the carrier.  Instead, in my view, the carrier should
  recoup its costs with a fair return by striving for economies of scale
  with affordable, geographically universal ISDN service as presently
  tariffed.
  
  An analogy to fax service is instructive:  if carriers had argued that
  fax lines should be segregated and pay a higher rate (e.g., to help pay
  for costs of increased line density and area code requirements), the
  market for fax machines and lines might have been stymied before it
  reached critical (price driven) mass.  By the same token, if ISDN
  rates are set higher to help pay for short term unforeseen
  deployment costs to deliver ISDN, the ISDN market in California--
  after a roaring, price-driven rush toward critical mass--may falter.
  Carriers in this regulated utility market should have long term focus
  on new and better services developed in partnership with the public,
  not just on how to squeeze more short term revenue (or to avoid
  cross-tariff competition) from incremental investment.  In any case,
  the unforeseen costs claimed to underlie this application are likely
  more a function of demographics of the roll-out than a fundamental
  misapprehension the costs of universal service.
  
  Finally, I believe the proposal is generally contrary to public interest
  and trends in our telecommunications infrastructure.  Among those
  trends are digitization, competition and decreasing prices--prices
  that are less sensitive to usage and distance, and that are market-
  based rather than cost-based.  The subject proposal is against all
  these trends, and I submit that the Commission should take a dim
  view of this trend-defying proposal.  It disfavors progress in
  California digital network access, increases prices unfairly after
  consumer equipment purchase decisions, and risks appropriating
  consumer surplus from competitive markets and stifling competition
  amongst different carrier services.
  
  Accordingly, I urge the Commission not to approve the proposed
  increases.  Thank you for your consideration.
  
  Very truly yours,
  
  
  John R. Sylla