Ohioans' Basic Telephone Service

Before
The Ohio House
Public Utilities Committee

Testimony on House Bill 402
by
Terry Etter

On Behalf of the
Office of the Ohio Consumers’ Counsel
January 30, 2018

Hello Chair Cupp, Vice-Chair Carfagna, Ranking Member Ashford, and members of the Committee. Thank you for the opportunity to testify regarding this legislation that impacts Ohioans as residential telephone consumers, especially with regard to basic wireline telephone service.

My name is Terry Etter. I have served the public as an attorney on telephone issues for the Ohio Consumers’ Counsel (“OCC”) since 1997. My testimony explains the Consumers’ Counsel’s opposition to House Bill 402, with a recommendation to not enact the bill. A backdrop to this legislation is that the telephone companies have obtained a number of significant deregulatory changes in Ohio law since 1989. This further legislation is not needed for telephone companies and is not good for Ohioans who use basic service.

Specifically, I will address four areas where the Bill is lacking consumer protection and could harm Ohio consumers. First, the Bill would allow incumbent telephone companies the sole discretion, without oversight, by the Public Utilities Commission of Ohio ("PUCO") to raise the rates consumers pay for basic service by 20 percent. (Lines 475-476.) Currently, telephone companies already have been allowed by the General Assembly to raise monthly rates by $1.25 per year.¹ And, this 20 percent increase could also apply to low-income consumers who subscribe to the telephone companies’ discounted Lifeline service. (Lines 526-529.)

Second, the Bill would eliminate service quality standards for basic telephone service by repealing R.C. 4927.08. (See Bill Preamble.) This means that telephone companies would not be held accountable for inadequate service to Ohioans.

Third, the Bill would remove – as applicable to telephone companies – the longstanding penalty in law that makes utility companies liable for treble damages for such violations to their consumers as inadequate service. (Lines 401-402.) The ability of consumers to seek treble damages from a telephone company that violates a rule or order of the PUCO is an important disincentive for utilities to violate laws and rules intended for consumer protection. And fourth, the Bill would reduce PUCO jurisdiction over two important areas – telephone company mergers and acquisitions (lines 303-390), and inspections of telephone companies’ facilities (lines 580-588).

These proposals should be rejected to continue the minimal regulatory protections that consumers have left after years of deregulation.

“Basic service” is plain telephone service without a lot of extra features. It allows customers to call within their local community for a flat rate, and have access to long distance service. Many people still want this type of service for a variety of reasons. It’s low-cost, so they have an affordable means of contacting their family, friends, doctors, and emergency services. They might not want or need features like caller ID, call waiting, call forwarding, or the numerous other features that telephone

By and large, basic service customers are often the elderly, who are on fixed incomes, or the poor, who are able to afford the service through discounts provided them from the federal Lifeline program. They can be harmed by the Bill’s proposed increase in the amount that telephone companies may charge consumers for basic service.

As stated, Ohio law already allows wireline telephone companies that meet certain conditions (for service alternatives) to raise the monthly charge that customers pay for basic service by $1.25 each year. The major telephone companies in Ohio have met these conditions, and have taken full advantage of the law by raising their basic service rates by the maximum every year. The telephone companies can raise rates because consumers lack effective choices from other providers for a service that is fashioned like basic service. Competitive providers just do not typically offer basic service to residential customers. Telephone companies do not need to “level the playing field” with competitors for offering basic service to consumers. When it comes to basic service, telephone companies generally have the field all to themselves.

Allowing telephone companies to increase their monthly charges to consumers of basic service by 20 percent would make it harder for elderly and poor Ohioans to afford telephone service. To get an idea how the Bill could affect basic service customers, let’s look at the rates charged by Ohio’s largest telephone company, AT&T Ohio.

According to AT&T Ohio’s tariff on file at the PUCO, its customers already pay about $30 per month for basic service. Presently AT&T Ohio can – and does – increase its monthly charge by $1.25 per year by prior legislation giving companies this discretion. Under the Bill, the allowable increase would be 20 percent, or about $6 per month from its present amount. So instead of paying $31.25 per month next year as is currently the case under Ohio law, basic service customers could pay $36 per month next year. And the charge to customers under the Bill could increase incrementally by 20 percent each succeeding year. That is a bad result for the many Ohioans still on basic service. And it is a result that would allow the telephone companies, by design or effect, to drive consumers off of the basic service to other services that the telephone companies (not the consumers) prefer.

The following chart shows the potential effect on consumers of allowing a 20 percent increase in basic service rates over the next four years:

Thus, the basic telephone service charge to customers could more than double in four years. The Bill can increase the challenge many elderly and low-income consumers have for paying for (and sometimes choosing between) phone service or paying for other essentials, such as heat, electricity, food, clothing, and medicines. Ohioans should not have to make that choice. Attached to this testimony are documents showing the challenges of Ohioans with food insecurity and poverty. And while the telephone industry told this Committee last week that they are not interested in losing customers, price increases such as those allowed in the Bill could have that effect. That result would be to the detriment of consumers whose telephone service is a vital link to loved ones, emergency services, and job opportunities.²

Adding to the Bill’s adverse effect on consumers is the elimination of the service quality standards for basic service in R.C. 4927.08. The law currently provides bare-bones consumer protections for installation, billing, and repair of basic service – which is the result of prior deregulatory legislation that the telephone companies sought and obtained. What remains are common-sense consumer protections to have in the law, such as installing service within five business days, giving customers at least two weeks to pay their bill, and crediting customers if their phone service isn’t repaired within three business days. In this regard, we believe the existence of the minimal consumer protections that remain can help with resolving service quality problems, such as when a Representative contacted OCC and others to assist multiple constituents with service problems from their telephone company.

And these current consumer protections only apply to basic telephone service. Consumers of bundled telephone service have only whatever rights are granted them under their telephone company’s customer agreement, again the result of prior deregulatory legislation. It is surprising and unfortunate for consumers that the Bill would eliminate the state legislative policy in R.C. 4927.02 (A)(1) that telephone companies must provide adequate basic service to Ohioans. (Lines 404-405.) Bad idea. Instead, telephone companies would merely be required under the Bill to make available “voice service” – which is different from the no-frills basic service – without even a requirement that the service be “adequate” for consumers’ needs.

The Bill would also make it a state policy to completely rely on market forces “to determine the availability, prices, terms, and other conditions of providing voice services.” (Lines 434-435.) Ohio is not there yet with competition for this particular service, basic telephone service, for Ohioans, so the change would leave these consumers unprotected. This change should not be made. That brings up the next point: remedies for consumers who have experienced poor service quality from their telephone company. Under current law, basic service customers have specific protections regarding service quality. These protections are plain and unambiguous, and damages are clearly determinable in complaint cases at the PUCO. But those would go away under the Bill, as I discussed earlier.

That would leave basic service customers with the same basis for a PUCO complaint as customers of bundled service have. Under R.C. 4927.06 they would have to show that the telephone company committed an unfair or deceptive act or practice. This language – which was supported by the telephone industry in 2010 – is similar to the language of the Ohio Consumer Sales Practices Act ("CSPA").

But unlike with the Consumer Sales Practices Act, the Bill would not allow consumers who are the victims of a telephone company’s unfair or deceptive practice from recovering treble damages – which has long been protection for consumers of all utilities. The treble damages provision of the CSPA is intended to act as a penalty for violating the law.³ This is meant to deter companies from committing the same unfair or deceptive practice multiple times. The Bill would eliminate this deterrent for telephone company consumers who benefit from it. In fact, telephone companies are rarely made to pay treble damages, so their exposure has been very limited. Treble damages should remain in the law for consumer protection.

And the final points concern PUCO jurisdiction. The PUCO’s jurisdiction over telephone companies was diminished in previous legislation, and the Bill further reduces the PUCO’s jurisdiction, to the detriment of consumers. The Bill would remove PUCO jurisdiction to approve telephone company mergers and acquisitions, and place it solely in the hands of the Federal Communications Commission in Washington, D.C. But the FCC might not be as attuned to the needs and circumstances of Ohioans as the PUCO may be. Thus, the Bill would take away an important venue for determining whether the transaction is in the public interest in Ohio. The Bill also appears to limit the PUCO's authority to inspect a telephone company’s facilities unless there is a consumer complaint regarding basic service that implicates the particular facility to be inspected. (Lines 586-588). This would hinder the PUCO’s ability to act on its own initiative to ensure that telephone company facilities are operating properly. Again, thank you for the opportunity to testify regarding House Bill 402 and its impact on Ohioans. I’ll be happy to answer your questions.

1 The $1.25 cap was specified in former Ohio Adm. Code 4901:1-4-11, which is referenced in R.C. 4927.12(C)(1)(b). It is now found in Ohio Adm. Code 4901:1-6-14(C)(1)(a). companies offer to consumers these days. These features add to the cost of the service, which means that – for these consumers – higher-priced bundled services are just not an adequate substitute for basic service.

2 It should also be noted that AT&T has proposed to stop providing the discounted Lifeline service to more than 10,000 low-income customers in Ohio. See PUCO Case No. 17-1948-TP-UNC.

3 See Grieselding v. Krischak (Lucas Cty. June 1, 2007), No. L-06-1010, 2007 Ohio App. LEXIS 2489, at **9.