PROPOSED RULEMAKING
[52 PA. CODE CH. 63]
[L-960117]
Reseller Location Surcharge Price Cap
[26 Pa.B. 4095] Executive Summary
By order entered April 30, 1996, the Pennsylvania Public Utility Commission (Commission) adopted a rulemaking to modify the regulations of telephone resellers' location surcharge. The proposal would amend the present regulations by imposing a $1 price cap for use of the telephone. In order to charge a higher rate, the reseller would be required to seek Commission approval subject to general ratemaking. In addition, the proposed amendments would require that the charge for the location surcharge be clearly posted in plain view at each telephone station.
The contact person is Janet M. Sloan, Assistant Counsel, Law Bureau, (717) 787-3663.
Commissioners Present: John M. Quain, Chairperson; Lisa Crutchfield, Vice-Chairperson; John Hanger; David W. Rolka; and Robert K. Bloom
Public Meeting held
April 25, 1996
Proposed Rulemaking Order By the Commission:
On November 27, 1991, the Commission entered a final order promulgating regulations which declared jurisdiction over interexchange resellers and established procedures governing the interexchange resellers and aggregators. The regulations became effective on April 4, 1992, and are codified in §§ 63.111--63.118.
The regulations impose a price cap form of regulation on resellers by generally prohibiting them from charging a higher rate for a given interexchange call than the highest rate charged for that same call by any facilities-based interexchange carrier or transporter. In addition to the capped rate, resellers are permitted to assess a charge for using the telephone, a charge commonly referred to as the location surcharge. The location surcharge is not capped by the regulations, but must be a flat rate and must be posted in plain view at each telephone station in order to provide consumer notice of the assessment and the amount of the location surcharge and provide consumers with the opportunity to go to another telephone or access another carrier, if desired.11 Furthermore, pursuant to § 63.115 (relating to tariff supplements), resellers are permitted to seek Commission approval of rate increases which would allow the reseller to charge rates which exceed the price cap and in doing so charge higher rates than any facilities-based carrier. Commission review of any such rate filing by a reseller is subject to general ratemaking procedures as provided for in Chapter 13 of the Public Utility Code.
From a practical point of view, the Commission imposed reseller price caps only have substantive effect on the operator service provider (OSP) sector of the general class of resellers. OSPs are resellers which provide interexchange service to end users through aggregators, entities which make telephones available for the provision of interexchange service to the transient public, or through local exchange carrier (LEC) pay telephones. OSPs have historically been the subject of rate gauging complaints since because the end user does not select the interexchange carrier, market based rate controls do not provide adequate consumer protections.22 In other reseller markets, the price caps have little substantive impact since the marketplace forces these carriers to compete at rate levels at or below the reseller price caps in order to attract and retain business.
Upon review, our 3 1/2 years of experience with reseller price caps combined with the location surcharge posting requirement has yielded mixed results. On one hand, intrastate OSP rates have clearly and significantly decreased as evidenced by the fact that intrastate OSP rates levels are, as a general rule, well below intrastate rate levels where no price caps are in place. In this regard, most OSPs and their aggregator customers have been relatively responsive to the Commission's informal insistence that location surcharges not exceed levels which are generally satisfactory to consumers, as measured by the level of consumer complaints. However, a minority of carriers have been unresponsive to informal regulatory pressures and have continued to engage in price gauging activity. Furthermore, compliance with the reseller regulations has been far from perfect, requiring frequent, time and resource consuming enforcement activity, often through formal litigation. Additionally, location surcharge postings, although theoretically providing a ''price tag'' or important consumer notice, are typically included in small print and ambiguously worded language. To the extent the postings are noticeable and informationally adequate, they are typically misunderstood or completely ignored by unsuspecting consumers.
Given the foregoing experience, we have concluded that stricter consumer protections are necessary to protect telephone users from OSP price gauging activity and that our regulatory framework must be modified to allow for more effective and efficient reseller regulation. It is this conclusion which results in our action today.
The rationale behind permitting OSPs to assess location surcharges is recognition of the fact that since resellers are typically smaller firms than facilities based carriers they likely will have higher costs of providing service. Furthermore, because of a lack of name recognition, OSPs typically will be required to pay higher commissions to aggregators or site owners in order to attract business. Accordingly, permitting location surcharges acts to stimulate competition in the aggregator telephone marketplace. However, at the same time, consumers must be protected from irresponsible activity which results in exorbitant rates without full consumer awareness. It is this required balance between these two interests which we are evaluating in determining to amend our reseller regulations.
Following careful consideration, it is clear to us that the reseller regulations must be amended to establish a cap on location surcharges. From our review, it appears that a $1 cap strikes the appropriate balance between competitive pressures and consumer protections. Combined with the posting requirements, the $1 location surcharge cap will provide consumers the necessary information to make competitive choices, but at the same time will provide protections from exorbitant rate levels. Furthermore, OSPs will still be permitted to charge a reasonable amount above facilities-based carriers without making a formal rate filing with the Commission. OSPs can still seek to increase rates further through a Chapter 13 filing if such an increase is justified.
Accordingly, through this order, we will initiate a proposed rulemaking to amend § 63.112a (relating to charge for use of the telephone) of our reseller regulations so as to impose a $1 cap on the amount assessed by resellers as a charge for the use of the telephone. Furthermore, we will modify our definition section at § 63.112 (relating to definitions) so that the definitions in the regulations will more closely parallel definitions contained in Chapter 30 of the Public Utility Code at 66 Pa.C.S. § 3002.
Accordingly, under sections 501, 1301, 3008 and 3009(d) of the Public Utility Code, 66 Pa.C.S. §§ 501, 1301, 3008 and 3009(d), sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1202 and 1202) and the regulations promulgated thereunder at 1 Pa. Code §§ 7.1, 7.2 and 7.5; section 204(b) of the Commonwealth Attorneys Act (71 P. S. § 732.204(b)); section 745.5 of the Regulatory Review Act (71 P. S. §745.5); and section 612 of The Administrative Code of 1929 (71 P. S. § 232) and the regulations promulgated thereunder at 4 Pa. Code §§ 7.251--7.235, we find that the regulations governing interexchange resellers should be amended as set forth in Annex A to this order or as amended after receipt of comments; Therefore,
It is Ordered that:
1. A proposed rulemaking docket is hereby opened to consider the amended regulations set forth in Annex A.
2. The Secretary shall submit this order and Annex A to the Office of Attorney General for review as to form and legality and to the Governor's Budget Office for review of fiscal impact.
3. The Secretary shall submit this order and Annex A for review and comment to the Independent Regulatory Review Commission and to the Legislative Standing Committees.
4. The Secretary shall duly certify this order and Annex A and deposit them with the Legislative Reference Bureau for publication in the Pennsylvania Bulletin.
5. Within 30 days of this order's publication in the Pennsylvania Bulletin, an original and 10 copies of any comments concerning this order and Annex A should be submitted to the Pennsylvania Public Utility Commission, P. O. Box 3265, Harrisburg, PA 17105-3265.
6. Alternate formats of this document are available to persons with disabilities and may be obtained by contacting Shirley M. Leming, Regulatory Coordinator, Law Bureau at (717) 772-4597 or through the AT&T Relay Center at (800) 654-5988.
JOHN G. ALFORD,
SecretaryRegulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), the Commission submitted a copy of these proposed amendments on August 9, 1996, to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House Committee on Consumer Affairs and the Senate Committee on Consumer Protection and Professional Licensure. In addition to submitting the proposal, the Commission has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the Commission in compliance with Executive Order 1996-1. A copy of this material is available to the public upon request.
If the Committees have objections to any portion of the proposed amendments, they will notify the Commission within 20 days of the close of the public comment period. If IRRC has objections to any portion of the proposed amendments, it will notify the Commission within 30 days of the close of the public comment period. The notification shall specify the regulatory review criteria which have not been met by that portion. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the regulations, by the agency, the General Assembly and the Governor of objections raised.
Fiscal Note: 57-174. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 52. PUBLIC UTILITIES
PART I. PUBLIC UTILITY COMMISSION
Subpart C. FIXED SERVICE UTILITIES
CHAPTER 63. TELEPHONE SERVICE
Subchapter H. INTEREXCHANGE RESELLERS § 63.112. Definitions.
The following words and terms, when used in this subchapter, have the following meanings, unless the context clearly indicates otherwise.
* * * * * Aggregator telephone--A telephone which is made available to the transient public, customers or patrons, including coin telephones, credit card telephones and telephones located in hotels, motels, hospitals and universities.
Charge for the use of the telephone--A [charge made by an aggregator whether or not collected by an interexchange carrier] location surcharge assessed as a component of the charge for an interexchange call [, for the use of its telephone to make an interexchange call] placed by an end user from an aggregator telephone.
* * * * * § 63.112a. Charge for use of the telephone.
* * * * * (b) The charge for the use of the telephone may not exceed a flat rate of $1 per call.
[(b)] (c) Except as provided for in subsection [(c)] (d), the charge for the use of the telephone shall be posted in plain view at each telephone.
[(c)] (d) ***
[Pa.B. Doc. No. 96-1370. Filed for public inspection August 23, 1996, 9:00 a.m.]
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