REMARKS OF BLOSSOM A. PERETZ, ESQ.
DIRECTOR, DIVISION OF THE RATEPAYER ADVOCATE
BEFORE THE NEW JERSEY STATE LEGISLATURE
SENATE COMMERCE COMMITTEE
STATE HOUSE ANNEX
TRENTON, NJ 08625
NOVEMBER 12, 1999
Good morning Senator Cardinale and members of the Senate Commerce Committee:
My name is Heikki Leesment, Deputy Ratepayer Advocate, and I am here today to provide to the Committee, the views of the Ratepayer Advocate, Blossom Peretz, on the bill being considered. The Director of our office, Blossom Peretz, would like first of all to convey her regrets in not being able to personally attend, due to the pressing demands of other matters at our offices.
The Ratepayer Advocate would, first of all, like to commend the Committee for its willingness to address the many worthy goals sought to be achieved by the substitute bill. As the Ratepayer Advocate has said on its several prior appearances before this Committee and others, legislative initiatives to ensure affordability of residential telephone service, to promote competition in telecommunications, and to reduce access charges to cost, are all important for the Legislature to address. While the Ratepayer Advocate supports the efforts of the Committee in these matters, we would suggest that text of the present bill may require modifications to achieve its intended results, and would urge the Committee to consider additional provisions to protect the interests of low income consumers of the state.
Addressing the specific provisions of the proposed bill, we would suggest that the definitions employed in the bill be set forth with some more exactitude.
The bill proposes to define ALocal exchange telecommunications carrier@ as Aa telecommunications carrier authorized by the board to provide local telecommunications services.@ There must be well over fifty carriers that have been approved by the Board to date to provide local telecommunications services in New Jersey. Very few, perhaps only one or two, are serving any residential customers, and the number of residential subscribers taking local exchange service from anyone other than one of the incumbent local exchange carriers, is exceedingly small. All of the competitive carriers have focused their efforts on primarily the businesses of the state. Thus, there may be many carriers providing local telecommunications service, but very few competing for the residential consumer. Since the vast majority of competitive carriers choose not to offer service in the residential marketplace, one would have to assume that they may not be able to calculate their cost of providing residential service, and even if they could, that cost calculation may be irrelevant. The Ratepayer Advocate would suggest that the cost information required under the bill be limited to carriers actually providing local residential service, or intending to provide such service.
The bill contains definitions of both AInterLATA@ and AIntraLATA@ calls. While the distinction undoubtedly has regulatory significance at the moment, it may become irrelevant in the future. Presently, the distinction is important because Bell Atlantic-New Jersey (BA-NJ), the largest incumbent local exchange carrier of the state, may not carry traffic across LATA boundaries. However, it is certainly not unreasonable to expect that BA-NJ will receive such authority in the near future, perhaps some time in the year 2000 or 2001. Once that occurs, the regulatory significance of LATA boundaries may become entirely meaningless. We would suggest that the bill should anticipate such regulatory developments likely to occur in the near term horizon.
The proposal would create a ALocal Telephone Support System Fund@ to ensure the perpetuation of Ajust, reasonable and affordable rates@ for residential local service. The Ratepayer Advocate applauds the Committee for its efforts in ensuring this eminently worthy goal for the entire state. As competition is increasingly felt in the telecommunications marketplace, the large customers and those placing large volumes of traffic on the network will have lots of choice in selecting carriers and services, and the competitive process will ensure that rates are as low as possible for them. It must not be forgotten, however, that there will be large numbers of consumers for whom there will be limited if any choices, and pricing plans that simply shadow each other rather than providing meaningful marketplace choices. In the rush to provide the best prices to large customers, carriers will try to recover a greater proportion of their fixed costs from customers that have the least choice. In most cases, this means the low volume residential subscriber. We have seen the increasing introduction of fixed, flat-rate charges imposed upon telephone subscribers under an alphabet-soup of different names -- such as the SLC, the PICC, the USF, the number portability surcharge, and the recent decision of AT&T to impose a monthly minimum of $3.00 on each residential subscriber. While the large volume customer may not object to paying these flat charges since its savings on long distance rates more than equal the fixed charges, the low volume subscriber has no choice but to pay. The Committee is rightfully concerned about the effect that all these flat monthly surcharges have on affordability for the average residential subscriber and the Ratepayer Advocate stands ready to work with the Committee to ensure that any bill released to the Legislature provides workable and meaningful relief to all New Jersey residential subscribers.
An issue not addressed by the proposed bill, but which we would urge the Committee to consider, is enlarging the Fund to include support for low income subscribers, and New Jersey=s schools and libraries. Telecommunications services are lifeline service for all New Jersey residents. The federal Act which opened the doors to competition throughout the entire Telecommunications marketplace for both local and long distance carrier operations created a Universal Service Fund, with contributions from all service providers, based upon revenue. Universal Service was defined to include affordable services for low income customers and customers in high cost areas and discounts for schools and libraries . In 1997 the Board of Public Utilities completed lengthy hearings for the purpose of implementing the requirements of the federal Telecommunications Act of 1996 in New Jersey. The final phase of that docket, addressing issues related to the universal service aspects of the federal Act, concluded in December 1997, almost two years ago. In that proceeding, the Ratepayer Advocate put forth a proposal for creating a New Jersey Universal Service Fund to support the affordability of telephone service in high cost areas of the state, to create a Lifeline assistance program for low income residential subscribers, and to provide assistance to New Jersey schools and libraries that may be denied benefits from the federal fund. The Board has yet to act upon our proposal and issue a decision in that proceeding.
In the interim period and while awaiting the creation of a comprehensive Lifeline program by the Board for the entire state, the Ratepayer Advocate concluded a stipulation with Bell Atlantic-New Jersey and Board Staff, ultimately approved by the Board in April 1997, for an interim Lifeline program covering just the Bell Atlantic service territory in New Jersey. This interim program has remained in effect since April 1997. Basically it provides low cost telephone service to low income residential subscribers. However, the interim program provides a savings to eligible subscribers from the low measured use tariff of Bell Atlantic. Low income residential consumers that want moderate use or unlimited local calling, are not provided any Lifeline assistance. At hearings held before the Board this summer, it was revealed that some 7,000 how income households have subscribed to the current interim Lifeline program. In a state with as many as 250,000 low income households receiving various categories of public assistance, current subscribership does not reflect the true needs of our communities. We believe that the low level of subscribership is due to the severe service restrictions imposed by the present interim Lifeline. We would ask the Committee to consider additions to the substitute bill which would recognize the need for low income Lifeline assistance in New Jersey, and establish a program providing substantial assistance while permitting eligible households to continue receiving service under available flat rate tariffs.
Our office has just received the proposed complex legislation as the end of last week and our review to its terms has not been complete. These brief remarks are not intended as a full and comprehensive critique of the entire bill and its many technical details. There is obvious need for legislation on there very complex issues of affordable telecommunications services in New Jersey. The Ratepayer Advocate stands ready to work with this Committee and all interested legislators, to lend our assistance in fine tuning the bill in order that it achieve its intended goals. We believe that the goals are appropriate and should materially assist in both creating a competitive marketplace in New Jersey as well as ensuring that competition does not come at the expense of maintaining rates for residential consumers at just and affordable levels. We applaud the Committee for undertaking this important and worthwhile effort.
In this first day of hearings on this important Telecommunication Legislation I wanted to leave you with a personal message.
One of the most difficult aspects of your responsibility as a legislator is to explain Achange@ to your constituents -- for every piece of legislation implicitly involves a Achange@. Your are charged with helping constituents understand that circumstances such as Ahigh energy costs@ or Aunbundling@ complex issues relating to telecommunications technology requires legislative action. There is the risk that some of your constituents won=t like these changes -- or that some of your constituents won=t like some changes that may be made to the proposed legislation. But to quote Alexander Graham Bell, Agreat discoveries and improvements unvariably involve the cooperation of many minds and there is nothing more difficult and more uncertain in its success than to take the lead in the introduction of new ideas.@
I congratulate you on your patience and attention to all business advocates and consumer advocates that have appeared before you. The road ahead is formidable.
Good luck and Thank you.