July 28, 1997 Mr. Steve McLellan, Secretary VIA FEDERAL EXPRESS Washington Utilities & Transportation Commission 1300 S. Evergreen Park Drive S.W. Post Office Box 47250 Olympia, Washington 98504-7250 Subject: Additional Comments of the Northwest Payphone Association on Possible Rulemaking Related to Payphones -- Docket No. UT-970301 Dear Mr. McLellan: We represent the Northwest Payphone Association ("NWPA"). These additional comments are submitted in response to the Commission's July 3, 1997, request for additional comments. Public Interest Payphones (Questions 1-12). The primary concern of NWPA is that any public interest program be open to all payphone service providers ("PSP") on a competitively neutral basis. The cost for establishing a public interest program should not be placed on PSPs. Although few payphones fall within the FCC's notion of a "public interest payphone," all payphones serve substantial public need. Payphones are an important provider of telecommunications services to the poor and disadvantaged in society. Thus, although a payphone may serve predominantly lower-income persons, it may nonetheless make a profit, thereby eliminating the need for state support. If funding for a public interest payphone program is placed upon PSPs, such a program would end up hurting the very people that it should benefit. Any public interest charge would have to be taken into account in establishing the local coin rate, which will be deregulated later in 1997. Because payphones are predominantly used by lower-income individuals, the public interest phone program would essentially be funded by these same customers. The end result is a regressive tax. One issue to consider when determining the "proximity" of a competitive payphone to a public interest phone is whether the competitive phone is in a restricted area. For example, a phone located inside a restaurant is available only when the restaurant is open. Thus, if a location requires a 24-hour public interest payphone, the competitive phone may not be available to serve that need during parts of the day, even though its proximity to a public interest phone is close. Question 13 - Regulation. The NWPA respectfully believes that the Commission lacks authority to directly regulate PSPs because PSPs fall outside the definition of a "telecommunications company." As the rules are currently written, the WUTC does not directly regulate PSPs. The Commission has not, in the past, required PSPs to register as telecommunications companies. Particularly, in light of the FCC's determination that payphones are customer premises equipment ("CPE"), the Commission should not undertake direct regulation of PSPs. See RCW 80.36.370 (exempting CPE from Commission regulation). There is no indication of a need to impose heightened regulation on PSPs. As the FCC noted throughout its Payphone Orders, PSPs are in a highly competitive market. This market is sufficiently competitive for the FCC to determine that it was appropriate to deregulate the local coin rate, thereby substituting the discipline of competition for traditional regulation. Certainly, the same competitive forces that will keep the local coin rate in line with consumer expectations will also insure that other aspects of payphone operations remain responsive to market and consumer demands. In an age when telecommunications services are being rapidly deregulated, it would go against the trend to establish heightened regulation of PSPs. In recent years, NWPA is aware of no heightened consumer complaints or market failures that would require a heightened regulatory role by this Commission. If a situation does develop where PSPs engage in business practices tending to deceive the public, sufficient mechanisms already exist to legally cure any such practices. For example, under the Consumer Protection Act ("CPA"), RCW Ch. 19.86, consumers have a cause of action against PSPs that engage in deceptive practices with the possibility of attorney fees and additional sanctions. Moreover, the Washington State Attorney General and local county prosecuting attorneys are empowered to enforce provisions of the CPA and other consumer protection laws. Finally, heightened regulation presents the potential for less competitive payphones available to the public resulting in a need for heightened public interest support. It is a maxim that an increase in regulation increases costs. Such costs will be increased proportional to the level of regulation. For example, regulations requiring certain repair times may result in the need for PSPs to hire additional repair staff. In practice, regulations establishing repair times are unnecessary. In the current competitive marketplace, if a phone is not repaired in a timely manner, the location provider generally has a contractual right to seek removal of the phone and the PSP from the location. Moreover, a non-operative phone does not generate any revenue for the PSP. PSPs that stay in business regularly check their phones through polling to determine their operational status and dispatch maintenance and repair crews at the earliest possible time. Where a phone is of marginal profitability, increased costs associated with heightened regulation could result in the removal of that phone. If the phone is in a location where a public interest phone is required, removal of the phone could place an additional burden on the public interest funding system. In short, PSPs have provided excellent service to the public in Washington for over a decade without direct regulation by the Commission. Even assuming that authority to regulate exists, such regulation should take place only if a compelling need is identified. Question 14 - Fair and Equitable Competition. NWPA generally supports the proposals listed under Question 14. These proposals are in accord with the FCC's Payphone Orders. In order to maintain a strong competitive payphone market, independent PSPs and LEC-owned PSPs must operate on a level playing field. Nondiscrimination provisions should include all areas of interaction between PSPs and LECs, including ordering lines, availability of lines, availability of unbundled services, assigned customer service representatives, equal access, and repair prioritization. NWPA also supports the proposal for OSP presubscription according to the choice of the individual PSP. Question 17. NWPA would appreciate the opportunity to review any draft rules and to comment upon those rules. NWPA would also be willing to participate in any further workshops on proposed payphone rules. Thank you for the opportunity to submit these additional comments. Very truly yours, David J. W. Hackett Brooks E. Harlow