roundtable: ISDN rates and FCC Inquiry
roundtable: ISDN rates and FCC Inquiry
ISDN rates and FCC Inquiry
James Love (love@Essential.ORG)
Sat, 15 Jul 1995 16:57:21 -0400 (EDT)
Date: Sat, 15 Jul 1995 16:57:21 -0400 (EDT)
From: James Love <love@Essential.ORG>
To: Telecomreg <telecomreg@relay.adp.wisc.edu>,
Subject: ISDN rates and FCC Inquiry
Message-Id: <Pine.SUN.3.91.950715165542.13982D-100000@essential.essential.org>
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TAXPAYER ASSETS PROJECT - INFORMATION POLICY NOTE
July 15, 1995
- Consumer Project on Technology (CPT) files Comments in FCC
Inquiry on ISDN prices.
- Consumer group asks for broader FCC inquiry into
overcharging for ISDN services.
- Issues raised in proceeding are somewhat technical, but
address important issues about future pricing of higher
speed network connections for individuals.
On May 30, 1995 the FCC issued a notice of proposed
rulemaking (NPRM), which asked for public comments on the way
that ISDN services should be treated by regulators. Of
particular concern were the so called Subscriber Line Charges
(SLCs), which are fixed monthly fees paid by consumers to use a
telphone line. The income from the SLC helps to pay for the
fixed costs of the local exchange telephone network. Because
ISDN lines provide higher functionality than analog telephone
lines, the FCC is trying to determine if they should require ISDN
consumers to contribute higher fees, such as requiring an ISDN
consumer to pay a new SLC for each "derived" channel that can be
sent over an ISDN line.
Currently residential ISDN connections may include two
"dervied" channels, and a T-1 connection may include 24 "derived"
connections. SLC charges in some markets are $3.50 for
residential consumers and $6 or $7 for business users.
Bell Atlantic and some other local exchange telephone
companies do not want to "book" the higher SLC charges against
their ISDN sales, in part because this "counts against" the
revenue they can get from the more closely price regulated voice
grade telephone services, and in part because the telephone
companies increasingly see ISDN service as a very important way
to deliver higher bandwidth services. [Bell Atlantic, for
example, is now experimenting in Philadelphia with an ISDN
service than can deliver greater than T-1 bandwidth (1.54 Mbps)
over ordinary telephone lines].
If this was just a question of consumers having to pay high
SLC fees or nothing, then this would be a simple matter.
However, SLC fees, which are fixed, are a substitute for so
called "Common Carrier Line" (CCL) charges, which are usage based
(per minute) fees. So basically, there are two issues. First,
should the higher bandwidth services pay higher SLC charges than
ordinary lines? Second, is it better to fiance the "local loop"
telephone network with fixed or usage based fees?
TAP has done a lot of work in this area recently, but in
order to work through a group with a clearer mandate, we have
created the Consumer Project on Technology (CPT) to address
issues like telecommnications regulation, ISDN pricing and other
things which are not directly related to TAP's mission. We may
change this new project's name if we can think of something
better (I personally think the name isn't that good, so
suggestions are welcome).
CPT filed "reply" comments in the FCC proceeding on friday.
The CPT comments addressed the issued raised in the proposed
notice of rulemaking, and also raised broader issues about the
way that ISDN services are being priced to consumers. In
particular, we asked the FCC to begin a broader inquiry into
excessive rates for ISDN services. Our comments are given below.
jamie love
----------------------------------------------------
Before the
Federal Communications Commission
Washington, DC 20554
In the Matter of
)
End User Common Line ) CC docket No. 95-72
Charges )
Comments of the Consumer Project
on Technology on ISD N Charges
The Consumer Project on Technology (CPT) submits these
comments in reply to comments by Bell Atlantic, the Commercial
Internet Exchange (CIX), and the joint comments by Compuserve
Incorporated, GE Information Services, Inc. and Prodigy Services
Corporation, on the Commission's inquiry into Subscriber Line
Charges (SLCs) and Integrated Services Digital Network (ISDN)
services provided by local exchange carriers (LECs).
The Consumer Project on Technology (CPT) was created by
Ralph Nader in 1995 as a project of the Center for Study of
Responsive Law, which he founded in 1968. This project is
engaged in research and advocacy on technology matters on behalf
of consumer interests. We are interested in the issues raised in
the Notice of Proposed Rule Making (NPRM) because we believe that
ISDN technology provides an opportunity, not yet exploited, to
give the public much higher speed access to telecommunications
networks at a low cost.
Our concerns about ISDN pricing are more general than the
SLC. At present LEC prices to consumers for using ISDN services
far exceed LEC costs in providing the service. Moreover, LEC
ISDN charges often include substantial metering charges, based
upon minutes of use or data packets sent, for calls made within
local service areas. For example, Bell Atlantic charges
residential consumers 4 cents per minute for local calls when
using both B channels on a Basic Rate Interface (BRI) service,
and some LECs charge more than 10 cents per minute for local ISDN
calls. These LEC prices to consumers are often so much higher
than the proposed SLC charges that broader policy issues must be
raised.
In our view, the Commission should start with the basic fact
that the existing infrastructure can be used far more intensively
and far more efficiently than is the case today, with very little
additional investment. ISDN technology allows users to obtain
much greater functionality out of the existing public network.
As the Commission noted, a standard twisted pair copper wire
phone line configured as a BRI ISDN service can deliver two voice
grade telephone lines, or one voice and one 56 (or 64) kbps data
line, or a single 128 kbps data line, with very little
additional cost to the LEC. And a Primary Rate Interface (PRI)
ISDN connection can provide 24 voice grade lines or a T-1 (1.54
Mbps) data connection on four copper wires, at a modest cost to
the LEC. However, these services are priced so high that usage
today is greatly restricted.
Businesses and non-profit organizations are being asked to
pay from $500 to $1,000 per month for PRI ISDN connections, which
is far in excess of LEC costs. Residential BRI ISDN tariffs run
the gamut, varying greatly from state to state, with some states
charging more than $70 per month for a single B channel (less
than half the bandwidth available on a standard twisted pair ISDN
line), plus various metering charges, despite the fact that cost
studies suggest that the incremental costs of upgrading a voice
grade line to a BRI ISDN service are from $2 to $10 per month
(excluding installation costs).
Of particular concern are the LEC metering charges, which
lead to inefficient uses of the network. Because much of the
appeal of ISDN services is for data transmissions and network
services, the usage sensitive metering charges are particularly
vexing. A residential or small business consumer that purchases
Bell Atlantic's BRI ISDN service and uses the line for a full
time 128 kbps connection to the Internet would incur more than
$1,700 per month in usage charges. The fact that these charges
are excessive is obvious, but more fundamental is the point that
any usage based pricing scheme will discourage individuals or
small businesses from using these technologies in the ways that
are socially desirable. That is to say, data lines are likely to
be used far more extensively than voice lines, even by
individuals.
LECs have traditionally tried to impose any number of
different methods of price discrimination that will allow them to
exploit their monopoly power, and charge more to consumers with a
higher willingness to pay. Usage based rates, even though they
lead to inefficient usage of the public network, are often
favored by the LECs, as a mechanism to charge more to higher
income consumers. However, the advantage of flat rate tariffs is
that the network, which includes high fixed costs, is used more
efficiently. Much of the popularity of the Internet is because
of a pricing scheme the is based upon capacity rather than usage.
Indeed, the relatively high penetration rates for cable TV are
also partly explained by the fact that the most popular services
are sold at fixed monthly prices, regardless of usage, and this
is perceived to be a good value by consumers.
In examining the SLC issue, the Commission has asked for
comments on a number of issues, including:
(i) whether or not LECs should impose higher SLC fees for
higher bandwidth services, or
(ii) whether or not SLCs, which are fixed and non-usage
sensitive fees, should in general be higher or lower,
or if more or less of the local loop costs should be
recovered through usage based Common Carrier Line (CCL)
charges.
In our view, the Commission should move toward a pricing
structure which encourages greater use of networks and of the
existing infrastructure. To accomplish this, we make the
following suggestions:
(1) Place an increasing emphasis on non-usage sensitive
charges to finance local loop costs. That is to say,
greater reliance upon SLC and less reliance upon CCL
charges.
(2) It is reasonable to charge a higher SLC for greater
bandwidth services, since those charges are reasonably
related to the benefits that one will receive from the
network.
(3) In setting the level of the SLC and the premium for
high bandwidth services, assume that it is socially
desirable for broader deployment of higher bandwidth
services, and that usage will respond positively to
lower consumer prices for the ISDN service and the
services that the ISDN lines will connect to.
(4) Open an inquiry into the extremely high premiums
charged by LECs to consumers for BRI and PRI ISDN
services, and seek rules which prevent LECs which have
monopoly power in local loop services from charging
excessive prices for ISDN lines.
(5) Price ISDN BRI and PRI services as mature technologies,
that should be widely available to the public, without
premiums normally associated with new experimental
technologies. ISDN, like dial tone, should be
considered a core service readily available to the
millions of families using the Internet and other
computer network services.
We believe that consumers are paying far too much to LECs
for ISDN services, and that the pricing of ISDN services is one
of the most important barriers to broader deployment of higher
performance network services. We are aware that Bell Atlantic,
for example, is now testing ISDN services that deliver nearly 2
Mbps to residential consumers using a standard twisted pair
copper wire local drop, and that changes in video data
compression have made this higher bandwidth service a highly
relevant alternative to the much higher cost fiber-coaxial
network architectures. Briefly, we hope that the Commission will
spend much more time examining the problem of excessive ISDN
pricing, and develop a more comprehensive national strategy for
broad low cost ISDN deployment.
Respectfully submitted,
______________________________
James Love
Consumer Project on Technology
P.O. Box 19367
Washington, DC 20036
202/387-8030
love@tap.org
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