April 30, 1997 Mr. Steve McLellan Executive Secretary Washington Utilities and Transportation Commission 1300 S. Evergreen Park Drive S. W. P. O. Box 47250 Olympia, Washington 98504-7250 RE:: Notice of Preproposal Statement of Inquiry (CR - 101) Docket No. UT-970301 Dear Mr. McLellan: On March 31, 1997, the Commission invited interested persons to file comments in response to its Notice of Preproposal Statement of Inquiry (CR - 101) in Docket No. UT-970301. This letter responds to the Commission request for comment on the need for a state rule relating to pay telephones and alternate operator service providers as a result of the Telecommuni-cations Act of 1996. The Act preempted aspects of intrastate pay telephone state regulation . U S WEST’s comments will address FCC Orders 96-388 ("Payphone Order") and 96-439 ("Reconsideration Order") in Docket No. 96-128), which involve the following topics: 1. The FCC’s requirement of the states to administer and fund Public Interest Payphone programs. 2. The definition of a Public Interest Payphone (PIP). 3. Other state PIP programs. 4. U S WEST’s approach to low profit payphones in Washington. 5. The fair and equitable support for entities providing PIPs, plan funding and competitive neutrality. 6. Current state commission payphone rules. 1. THE FCC’S REQUIREMENT OF THE STATES TO ADMINISTER AND FUND PUBLIC INTEREST PAYPHONE PROGRAMS. The FCC's Payphone Order addresses Public Interest Payphones (PIPs) beginning with paragraph 264. It describes the FCC’s responsibility under the Telecommunications Act (Section 276). This paragraph also states as follows: “Consistent with our primary reliance on the competitive marketplace, however, these guidelines require that the states administer and fund such public interest payphone programs in a manner which is competitively neutral, and which fairly and equitably compensates entities providing public interest payphones.” 2. THE DEFINITION OF A PUBLIC INTEREST PAYPHONE (PIP). The FCC’s definition of a PIP is as follows: "A PIP; (1) fulfills a public policy objective in health, safety, or public welfare; (2) is not provided for a location provider with an existing contract for the provision of a payphone; and (3) would not otherwise exist as a result of the operation of the competitive marketplace." U S WEST agrees with this definition. 3. OTHER STATE PIP PROGRAMS. A. THE IOWA APPROACH. U S WEST strongly supports the following approach to this issue taken by the Iowa Utilities Board. Iowa found that payphones were subject to competition and deregulated them, along with the local call rate in 1985. After review of the PIP issue, “The Board determined that the local community was the best judge of where the public interest required phones to be maintained. If a community was concerned about keeping a payphone in the community, the community could provide it. In the eleven years that payphones have been deregulated the issue has arisen very rarely at the agency or legislative level.” In Iowa today, consumers can obtain Public, or Semi-Public Payphone service by contacting the U S WEST business office. The Iowa approach described above is self administering and it works. During the comment period preceding the above mentioned FCC Orders, the Iowa Utilities Board argued that they had found it, “not necessary to establish rules requiring public interest payphones” in that state. A copy of the Iowa comments is attached. B. THE CALIFORNIA PROGRAM. The FCC Payphone Order, paragraph 279 describes the California program, which is funded by the payphone industry as a whole. Although this program seems appropriate for California, where there are numerous large Payphone Service Providers (PSPs) and several very large cities with many profitable payphones (allowing all PSPs to spread the cost of PIPs over a comparatively large base), this approach would not work in states that have fewer large cities, fewer PSPs and a relatively more rural population. In Washington, the LECs would be forced to shoulder almost the entire burden of supporting PIPs. In addition, the provider funded approach (i.e., requiring all PSPs to fund PIPs) might deter competitive entry by independent PSPs into Washington because a mandatory contribution into the state’s PIP fund would operate like a tax. 4. U S WEST LOW PROFIT PAYPHONES CONVERSION PROGRAM. HOW DOES THIS PROGRAM ADDRESS WASHINGTON PIPS? U S WEST recognizes that the elimination of subsidies which have helped support payphones in the past, as directed by the 1996 Act, will result in the removal of many payphones that are unprofitable today, absent the availability of alternative methods to ensure their existence. For these reasons, U S WEST has a program underway (since August, 1996) which identifies unprofitable payphone locations, and offers the location provider the option to convert the payphone to Semi-Public status (and share in the cost) in lieu of the payphone being removed. U S WEST believes this program will eventually identify and address every unprofitable U S WEST payphone location in Washington. By contacting these location providers, this program will address the PIP issue for our existing locations. In addition, offering the location provider the option of Semi-Public status will allow the location provider to determine the strength of the need for a payphone at that location. In other words, the local community will determine the need and then fund a Semi-Public payphone if the need is strong enough. If a new payphone is requested by a potential location provider, U S WEST may offer to install a Semi-Public payphone if it is determined that the location would not otherwise be profitable. 5. THE FAIR AND EQUITABLE SUPPORT FOR ENTITIES PROVIDING PIPS, PLAN FUNDING AND COMPETITIVE NEUTRALITY. The fair and equitable support in the provision of PIPs is a statutory requirement of the Telecommunications Act, Section 276. Since many PIPs are likely to be very remote, the cost of providing and maintaining such payphones will differ by location. As suggested by the FCC, the Universal Service Fund may be an option for funding a PIP plan. However, we believe the need to administer such a PIP plan would burden the Commission Staff as well as the state’s payphone providers. Furthermore, U S WEST believes that the difficult administration of any such plan could easily result in situations that are not competitively neutral to some or all LECs, and to some payphone providers. 6. CURRENT STATE COMMISSION PAYPHONE RULES. Commission Rules should be revised to remove any requirement by the LEC to provide payphone service in every exchange. The LEC must no longer be looked upon as the payphone provider of last resort. This public need should be met through the provision of PIPs as described in FCC 96-388 and FCC 96-439. Any other payphone requirements in Commission Rules must apply to all PSPs, and be enforced equally in order to guarantee competitive neutrality. Specifically, existing rules should be modified as follows: A. WAC 480-120-137 ° No change is required to WAC 480-120-137. B. WAC 480-120-138 ° The last sentence of the first paragraph of 480-120-138 should be changed as follows: Current: Local exchange companies that do not have a public access line tariff on file with the commission shall not be subject to these rules. Proposed: Local exchange company tariffs must meet FCC public access line requirements. Rationale: All companies must meet the FCC requirements set forth in the Telecommunications Act of 1996. ° Paragraph (4) should be entirely removed. Rationale: The prices charged for services delivered at the pay phone are no longer regulated. ° Paragraph (11) -- modify paragraph as proposed. Current: Except for service provided to hospitals, libraries or similar public facilities in which a telephone ring might cause undue disturbance, or upon written request of a law enforcement agency, coin operated pay telephones must provide two-way service, and there shall be no charge imposed by the subscriber for incoming calls. This subsection will not apply to pay telephones arranged for one-way service on May 1, 1990. Should an existing one- way service be disconnected, change telephone number, or change financial responsibility, the requirements of this subsection shall apply. All pay telephones confined to one-way service shall be clearly marked on the front of the instrument. Proposed: There shall be no charge imposed by the subscriber for incoming calls. Certain pay telephones may be designated one-way service only. All pay telephones confined to one- way service shall be clearly marked on the front of the instrument. Rationale: Section 276 of the Act directs the Commission to establish a plan "to ensure that all payphone service providers are fairly compensated for each and every completed intrastate and interstate call using their payphone." Therefore, in order for a payphone service provider to be fairly compensated for every call, they must have the right to block incoming calls which are currently not compensable. C. WAC 480-120-141 ° No change is required to WAC 480-120-141. D. WAC 480-120-142 ° No change is required to WAC 480-120-142. In summary, U S WEST strongly supports the implementation of a PIP plan in Washington that is self administering, and does not burden the Commission Staff, the LECs nor the payphone providers with unnecessary administration. U S WEST’s existing program, which is identifying low profit payphone locations and converting some to Semi-Public status, is addressing two critical PIP program needs. That is, the need to identify existing locations that fit the PIP definition, and the need for a process to install a new PIP when required. The attached Iowa plan addresses the other critical need, which is a plan that is self administering. The Iowa plan deserves serious consideration for possible application in Washington. I look forward to the workshop scheduled for May 5, 1997. Please feel free to call me with any questions you may have. Very truly yours,