Office of the Ohio Consumers' Counsel

Home Skip Navigation Go to Section Menu

Telecommunications

The price and quality of traditional home telephone service was of concern to residential phone users and the Office of the Ohio Consumers’ Counsel in 2007. While some residential consumers have chosen not to subscribe to traditional landline home telephone service – in fact, some younger consumers have decided to begin their adult lives with only a wireless handset – the majority of consumers still rely on their home’s copper wires to produce a dial tone for their service.

Either by choice, economics, or the lack of availability of cellular or broadband service where they live, some consumers have decided to have landline service as their only telephone service while others have complemented that service with a wireless option. Meanwhile, some Ohioans desire a package of features and unlimited long distance, while others only purchase basic local service with few, if any, optional features.

All of these customers must be kept in mind when the OCC performs its role as the residential utility consumer advocate.

Rate Increases Under Alternative Regulation

Over the last several years, Ohio’s large telephone companies have been granted “elective alternative regulation,” that permits them to increase the rates of telephone features such as Call Waiting and Three-Way Calling as well as the prices of packages that typically include basic local service and several features. The costs of features from some of the companies have increased significantly.

In August 2007, the OCC alerted consumers to Verizon’s second round of rate increases since the company was granted elective alternative regulation in June 2006. For instance, over that time, the monthly price of Call Waiting increased from $3 to $5 and Call Forwarding went from 75 cents to $3 per month. Some customers with packages of services also had their rates increased.

Likewise, Windstream (formerly Alltel) imposed its third set of increases since it was granted elective alternative regulation by the Public Utilities Commission of Ohio (PUCO) in October 2004. For example, over that time, the price of Call Forwarding and Three-Way Calling rose from $1.50 to $3.99 per month. In addition, customers using certain features such as Call Return (*69) on a per-use basis saw higher prices.

In 2006, AT&T and Cincinnati Bell became the first two companies to be granted basic local service “alternative regulation” by the PUCO for certain telephone exchanges. This authority allows the companies to increase the monthly price of basic local service and basic Caller ID for many customers by $1.25 and 50 cents, respectively, each year. Cincinnati Bell used its new authority to increase its rates for basic local service in and around the cities of Cincinnati and Hamilton by the maximum $1.25 in January 2007.

Broadband Availability

Given the potential for rate increases in many customers’ traditional telephone service, the OCC supports efforts to help increase the availability of reasonably-priced broadband access for residential consumers throughout Ohio. One of the benefits of broadband is the ability to use Voice over Internet Protocol (VoIP) telephone service. While users of VoIP technology need to be aware of the differences of that type of service from traditional home telephone service, progress is being made in areas such as enhanced 9-1-1 capability, which is the technology needed to determine the location of a 9-1-1 call and send it to the correct emergency operator.

To that end, the OCC has a representative on the Ohio Broadband Council, which is a coordinating organization behind important efforts to improve access.

Elimination of Federal Excise Tax on Long Distance Bills

Using its resources to communicate with the public and the media, the OCC helped alert telephone customers of a special one-time refund available through their federal tax forms. As part of a U.S. Treasury Department decision in May 2006, customers were entitled to refunds equal to the excise taxes paid on long-distance service after Feb. 28, 2003 and before Aug. 1, 2006. The federal excise tax on local service remained in effect.

Residential consumers were able to receive up to a $60 standard refund as reimbursement for a federal long-distance excise tax eliminated by the Treasury Department. Refunds either reduced the amount owed by the consumer in federal taxes or increased the amount of their overall refund. Residential consumers who believed they were owed over the standard refund amount were able to base the refund on an actual calculation of the taxes they paid if they had their old bills.

The OCC successfully requested that the PUCO suspend a $5 fee AT&T had begun charging consumers for printed copies of past long-distance bills. The fee came at the time when some consumers were likely requesting past bills to calculate the one-time long-distance telephone tax refund. If this AT&T fee had been applied for each past bill requested by consumers, those fees could have cost more than the federal telephone tax refund to which they were entitled.

Federal Universal Service Fund

Universal service programs are funded through small charges on customers’ telephone bills which help maintain the Universal Service Fund. These programs support affordable telephone access in areas that are expensive to serve (including rural areas) and for low-income customers through programs such as Lifeline and Link-up. Additional efforts include support for rural health care and technology for schools and libraries.

On behalf of the National Association of State Utility Consumer Advocates (NASUCA), the OCC continued to play a prominent role in ongoing debates over the way the Universal Service Fund collects its revenue as well as the size of the fund. For example, at its annual meeting in December 2007, NASUCA members called for the FCC to reject proposals that would drastically alter how consumers pay into the federal fund, unless proponents could show that consumers will benefit.

Currently, consumers’ contributions are primarily based on how often they use their telephone. Proposals under consideration by the FCC include a flat fee contribution, which would substantially increase the monthly bills of those residential customers who make few or no long-distance calls.

On a related note, one of the OCC’s regulatory analysts, Kathy Hagans, was appointed to the staff of the Federal-State Joint Board on Universal Service. NASUCA is allotted three staff and one voting member of this important telecommunications board, which was established in 1996 to make recommendations on how to operate the various universal service programs authorized by Congress. As part of the joint board’s staff, Ms. Hagans will work with the two other appointed NASUCA staff – from Wyoming and Florida – as well as staff from Federal Communications Commission (FCC) and various state utilities commissions.

Consumers’ Counsel Argues at Supreme Court of Ohio for Reversal of Telephone Pricing Decisions

The OCC appealed to the Supreme Court of Ohio two PUCO decisions that gave AT&T and Cincinnati Bell the opportunity to increase the price of basic local services for many residential customers. Oral arguments were held in December 2007 and as of the end of the year, a decision by the Court is pending.

The separate appeals were from PUCO decisions that allowed AT&T and Cincinnati Bell to fall under “alternative regulation” and to increase the monthly price of “stand-alone” basic local service and basic Caller ID by $1.25 and 50 cents, respectively, each year. Stand-alone basic service is dial tone and local calling without additional services such as voicemail and Call Waiting.

After the General Assembly passed a law allowing for alternative regulation of basic telephone service, the PUCO adopted rules in 2006 that detail how local telephone companies could become eligible to increase the monthly price of basic local telephone service. A PUCO decision in November 2006 allowed Cincinnati Bell to raise customers’ basic rates in its two largest exchanges in and around the cities of Cincinnati and Hamilton. Cincinnati Bell used its new authority to increase its rates for basic local service by the maximum $1.25 in January 2007. A PUCO decision in December 2006 permitted AT&T to raise the rates in 136 of its 192 exchanges. At the time of the OCC’s appeal, AT&T had not imposed such increases, but received permission for alternative regulation for an additional eight exchanges in June 2007. (See report on 07-259-TP-ALT.)

Ohio law does not allow telephone companies to raise rates for the most basic of telephone services through “alternative regulation” unless such a result is in the public interest and competitive choices or reasonably available alternatives exist for customers. The law also requires that competitors face no barriers in providing basic local service. OCC argued that the PUCO’s eligibility criteria allow telephone companies to raise rates even when these legal conditions are not met. For example, consumers have few, if any, competitive choices for AT&T’s and Cincinnati Bell’s stand-alone basic services.

The OCC contended that the PUCO erroneously based its rules and the two decisions on competition involving more expensive packages that include features rather than basic dial tone service. The PUCO granted alternative regulation for such service “bundles” in 2001; thus the “basic service” covered by the new law was stand-alone basic service. In addition, the cable and wireless services upon which the PUCO relied for granting alternative regulation are not competitively priced with local telephone companies’ basic service and are not typically available to all customers throughout an exchange. — Supreme Court of Ohio Case Nos. 07-570, 07-659

Eight Communities Facing Potential AT&T Rate Increases

In addition to the 136 AT&T exchanges already granted “alternative regulation” for basic local services by the PUCO, residential customers of eight more communities could see price increases based on the approval of an additional request by the company. The PUCO’s alternative regulation rules detail how local telephone companies could become eligible to increase the monthly price of basic local telephone service by as much as $1.25 per year and basic Caller ID by a maximum of 50 cents per year.

In spite of the OCC’s demonstration that AT&T had not made the showing required by the PUCO’s rules and Ohio law, in June 2007 the PUCO permitted potential rate increases for AT&T customers living in the Barnesville, Belfast, Dresden, East Liverpool, Harrisburg, Lewisville, Salineville and St. Clairsville exchanges.

The OCC has appealed this ruling as well to the Ohio Supreme Court. The case has been stayed pending the outcome of OCC’s earlier appeals of the PUCO’s rules for basic service alternative regulation and decisions that were made under those rules. — Case No. 07-259-TP-BLS

Four Communities Facing Potential Embarq Rate Increases

Embarq requested “alternative regulation” for the basic local services it offers customers in four exchanges in southwestern Ohio, including Lebanon, Mason, South Lebanon and Waynesville. Alternative regulation would allow the company to increase the monthly price of “stand-alone” basic local service and basic Caller ID for affected customers by $1.25 and 50 cents, respectively, each year. Stand-alone basic service is dial tone and local calling without additional services such as voicemail and Call Waiting.

The OCC carefully reviewed Embarq’s application and found it failed to meet the statutory requirements that residential consumers in these exchanges have competitive options available or reasonably available alternatives to Embarq’s basic service. The OCC opposed Embarq’s request to be able to raise rates for basic service to consumers in the four exchanges.

The OCC was concerned that residential consumers who simply want basic dial tone service could see their bills increase while having few, if any, comparable choices.

Embarq’s request was approved for all four exchanges in December 2007. The OCC has asked the PUCO to reconsider its decision. — Case No. 07-760-TP-BLS

Verizon Customers Deserved More Benefits Due to Company’s Poor Service

The OCC found that consumer complaints to the PUCO about Verizon service quality reached a four-year high in 2006. In addition, data from the Federal Communications Commission (FCC) showed that the number of Verizon customer complaints in Ohio increased 400 percent from 1998 (220 per million telephone lines) through 2006 (933 per million telephone lines). For 2005 and 2006, Verizon’s complaint rate filed with the FCC was higher than the total of all other Ohio telephone companies reporting data, including AT&T, Cincinnati Bell and Embarq (formerly Sprint).

Among the apparent violations of the state’s telephone consumer protections, the OCC found Verizon had failed to repair telephone outages within 24 hours or other service-related problems within 48 hours, missed commitments and appointments related to installations and repairs, and failed to install new service within five business days.

Verizon service quality had been of concern in other states as well. State regulators in Maine, New Hampshire, New York, Vermont and West Virginia formally investigated Verizon’s performance. In some cases, significant fines or commitments to improve service have resulted.

In April 2007, the OCC asked the PUCO to order the company to “show cause” why it should not be found to be providing inadequate service.

The OCC urged the PUCO to require Verizon to provide an action plan to bring its local service into compliance within three months and submit monthly data to show its repair and installation performance for the next two years.

The OCC also asked the PUCO to consider ordering Verizon to provide customer benefits to make up for what appeared to be systemic service quality problems, and to look at imposing penalties based on certain service quality findings.

On April 30, 2007, a settlement agreed to by Verizon and the PUCO staff was filed in a separate proceeding. Under the settlement, Verizon agreed to make $1,000,000 in incremental infrastructure improvements and pay a $250,000 penalty to the state. Other penalties would be suspended unless a violation of the agreement occurs.

The OCC reviewed the settlement and concluded it was inadequate given the severity of the service problems and Verizon’s size. The OCC stated that insufficient commitments were made by Verizon to improve its system’s infrastructure and inadequate credits would be provided to individual customers if the company’s service problems continued. Additionally, the OCC requested that the PUCO hold local public hearings to provide customers with an opportunity to voice their opinions about Verizon’s service quality.

The PUCO approved the settlement on May 2, 2007, and dismissed the OCC’s request for an investigation. The PUCO also denied OCC’s request for rehearing on the matter. — Case Nos. 07-511-TP-UNC, 07-390-TP-UNC

Revisions to Ohio’s Minimum Telephone Service Standards

Residential consumers had important telephone service safeguards maintained but others scaled back as part of the PUCO’s review of the Minimum Telephone Service Standards, which are consumer protections all telephone companies in Ohio must follow.

Many recommendations made in August 2006 by the PUCO staff would have significantly weakened the rules. The OCC and other consumer groups opposed reducing the level of protections and led a coalition of consumer organizations and cities in an effort to keep – and in some cases strengthen – the Minimum Telephone Service Standards.

Important protections that remained in effect include maintaining the ability for consumers with medical conditions to be placed on a priority repair list. The new rules also continue to prohibit most telephone companies from disconnecting customers’ basic local service if they have paid that portion of the bill. However, under the new rules, customers facing disconnection may receive their only notice as a bill message instead of through a separately mailed notice of disconnection.

A major consumer protection that was scaled back involves customer credits when telephone companies’ fail to make timely repairs. Under the prior standards, customers were entitled to credits if they were out of service for more than 24 hours, with increasing credits at 24-hour intervals up to a full month’s credit for an outage lasting 96 hours. Under the PUCO’s new rules, however, customers are not entitled to any credits for telephone service outages unless they are without service for 72 hours or more, in which case they would be entitled to a full month’s credit. The OCC believes the change was unfair to customers, many of whom could be required to pay for service they do not receive.

The new rules also increased to $2 the maximum fee that consumers could be charged for making payments at authorized agents, up from twice the cost of a first-class postage stamp as was allowed under the old rules. While the PUCO’s staff recommended the fee increase to $5, the OCC argued the increased charge would have a significant financial impact on a portion of telephone consumers who have lower or fixed incomes.

In spite of the OCC’s efforts, the new rules do not ensure that telephone company representatives will meet a customer’s needs before marketing services. Under the previous rules, customer service representatives were required to address an incoming caller’s concerns before marketing services or features. Now, the rules allow companies to market services unless customers are calling with service problems or to make payment arrangements. — Case No. 05-1102-TP-ORD

Companies’ Requests for Waivers of Minimum Telephone Service Standards

Two large telephone companies, Embarq and AT&T, asked to be granted waivers from complying with certain consumer protection rules, including some of Ohio’s Minimum Telephone Service Standards.

Embarq

Embarq asked the PUCO to waive several rules which would: enable the company to market services to an existing customer needing a repair before resolving that customer’s concern; fail to inform new customers of the most economical service option based on their needs; and, impose the total installation charge on a new customer’s first bill, rather than allowing the costs to be spread over three months.

Embarq also wanted a waiver from consumer protections that require telephone companies to inform consumers about their rights concerning inside wire maintenance plans, the availability of Caller ID blocking and their right to use a guarantor instead of paying a deposit.

The OCC joined with other consumer groups to oppose the waiver request and to preserve essential safeguards and payment options that serve to inform and protect customers. The opposition noted that, in 2006, Embarq entered into a settlement with the PUCO which involved a $200,000 penalty by Embarq for its failure to comply fully with these disclosure practices during 2002 through 2005. Following the opposition, Embarq withdrew its request.

The company also requested a more limited waiver involving its billing format. Embarq asked to be able to provide the option of summary billing to customers in place of the more detailed billing required under the standards. The OCC did not object to the concept of summary bills, so long as customers are able to choose the level of detail that meets their needs. The OCC did, however, express concerns that the format of Embarq’s proposed summary bills failed to include information needed by all its residential customers.

For example, brief descriptions of all services for which a customer is being charged helps customers verify that no unauthorized services have been added to their bill. In addition, notification that Ohio consumers cannot be disconnected for nonpayment of toll charges ensures that all customers understand the protections in place to assure their access to basic local calling.

The OCC also asked the PUCO to ensure that new Embarq customers be provided the two options of summary or detailed billing and that the detailed bill be furnished to customers that do not express a preference.

This request was withdrawn by Embarq at the same time as the larger waiver request. Subsequently, however, Embarq refiled the request. At the close of 2007, the Embarq request is pending a decision by the PUCO.

AT&T

In November 2007, AT&T filed a request with the PUCO to be exempted from having to comply with certain requirements under the PUCO’s recently-revised version of the Minimum Telephone Service Standards. The company asked for a waiver of requirements to allow customers to make a one-time change without charge in their telephone services within 30 days of placing an order with the company. In case the PUCO rejected this waiver request, the company asked for additional time to implement the rule in order to train employees and to include language in its welcome letter regarding the onetime change.

In addition, AT&T wanted a waiver of the rule prohibiting the compounding of late payment charges – in other words, AT&T wanted to apply late charges to amounts that already include such a fee. AT&T also asked for an unspecified amount of time to change its billing system, if the PUCO rejected its request.

The OCC opposed AT&T’s waiver requests and argued that the company had not justified the need to be exempted from these consumer protection rules. The OCC noted that the one-time change was already in the PUCO’s rules; the only thing that had changed was that customers had 30 days, instead of the 60 days under the old rule, to make a change. Any training that was needed should be minimal. In addition, the OCC noted that under AT&T’s late charge structure, the new rule would apply only on customer bills greater than $333.66, and thus reprogramming AT&T’s billing system should not be too complicated for a company the size of AT&T. The OCC also expressed concern about delaying AT&T’s implementation of some rules, citing that the company had had adequate time after the rule changes were announced in July 2007 to train employees and address billing issues.

In December 2007, the PUCO denied AT&T the permanent waiver it requested and the company’s request for additional time to implement the 30-day change rule. The PUCO also gave AT&T only until March 1, 2008 to make any necessary changes to its billing system.

In addition, in March 2007 the PUCO ruled on an “Act of God” waiver request that AT&T filed in July 2006 involving five exchanges in Lake County. AT&T argued that flooding in that area prevented the Company from making timely repairs of service outages for a nine-day period. AT&T requested the waiver in order to avoid paying some customer credits that would be due under the MTSS.

In comments filed in the proceeding, OCC noted that AT&T’s documentation to support the request did not justify a waiver from having to pay customer credits in all five exchanges for the entire nine-day period. OCC stated that, at most, the company should be granted a waiver for seven days. The PUCO’s order granted AT&T a waiver for only a four-day period. — Case Nos. 05-1102-TP-ORD, 03-888-AU-ORD, 00-1265- TP-ORD, 93-540-TP-COI, 86-927-TP-COI

OCC Stands Up for Consumers Harmed by Buzz Telecom

As a result of an investigation in 2006, the OCC found that Buzz Telecom representatives misled many residential consumers into believing that telemarketing calls were from their local telephone company rather than Buzz Telecom. Buzz Telecom also led seniors to believe that they would receive a special discount. Instead, their long-distance service was switched to Buzz Telecom at rates that increased their telephone bill.

In November 2006, the OCC filed a motion to suspend Buzz Telecom’s Ohio certificate. In the motion, the OCC called for the PUCO to order Buzz Telecom to stop serving Ohioans and to launch a formal investigation into Buzz Telecom’s activities. In December 2006, the PUCO, in a separate proceeding, ordered Buzz Telecom to stop marketing to consumers and told the company to “show cause” as to why its operations should not be permanently revoked in Ohio. In the PUCO investigation, the OCC asked for sizable fines against Buzz Telecom.

In a decision issued on October 3, 2007, the PUCO held Buzz Telecom accountable for its poor service and deceptive sales tactics, imposing a $251,000 fine against the company. However, the PUCO did not require the company to identify Ohio consumers who had made payments and to refund their money. Instead of mandating refunds to customers, the PUCO noted that customers could seek damages in court.

Concerned that it will be difficult for each individually affected consumer to pursue the refunds to which they are entitled, the OCC asked the PUCO to reconsider its decision. On November 28, 2007, the PUCO denied the OCC’s request. — Case No. 06-1443-TP-UNC

OCC Advocacy Helps Lead to Penalty Against UMCC

Advocacy by the OCC resulted in a $208,000 penalty against telephone service provider UMCC Holdings, Inc. and a finding by the PUCO that the telephone company provided inadequate service. UMCC was ordered to stop providing any telecommunications service in Ohio as well as cease billing and collecting payments from Ohio consumers.

The PUCO action was based on a complaint filed by the OCC asserting that UMCC violated state rules by providing telephone services without a required certificate, failing to notify the PUCO and customers about a transfer of consumer accounts from Buzz Telecom and neglecting to include necessary information on monthly bills.

UMCC acquired the customer accounts of Buzz Telecom, an Indiana-based company that was the target of customer complaints of misleading marketing practices and switching long-distance service without customers’ permission. — Case No. 07-546-TP-CSS

Rules For Retail Telephone Service Reviewed

A review of Ohio rules governing the retail aspects of providing competitive telephone service was conducted in 2007. The staff of the PUCO issued proposed modifications which the OCC carefully reviewed. The OCC filed its comments on potential changes.

The OCC found some of the PUCO staff’s changes acceptable because they would streamline the rules telephone companies must follow, without eliminating consumer protections. However, certain changes proposed by the PUCO staff or the telephone companies would dilute or eliminate important consumer protection standards.

For example, some telephone companies argued for the freedom to set any level of return check charges and late payment fees; eliminate oversight of residential basic telephone services; to not have to file tariffs for basic telephone services or promotions; and limit or eliminate advanced customer notice of changes in rates, terms and conditions of service.

Under the revised rules, local toll service was “detariffed” for residential customers. This means that rates, terms and conditions would no longer need to be kept as tariffs at the PUCO. It also means residential customers would need to enter into agreements with their local toll providers. Similar detariffing occurred several years ago at the Federal Communications Commission with respect to consumers’ other long-distance toll services.

The OCC opposed the detariffing, pointing out that there would be no ability to verify terms and conditions against the tariffs on file at the PUCO. In addition, consumers would not be able to check that company representatives are providing accurate information to them.

Detariffing for residential local toll service was approved; however, the OCC sought to ensure customers would be appropriately educated about the change, including the fact that individual agreements will have to be entered into with companies. To this end, the OCC sought revisions to a standardized notice to be used by the telephone companies to inform customers.

The PUCO agreed with the OCC, and revised the notice to include language regarding customer agreements and the importance of carefully reviewing and confirming prices, terms and conditions.

Other portions of the revised rules include the OCC’s recommendations. Basic telephone services, return check charges and late payment fees continue to be regulated, and tariffs must continue to be filed for basic telephone services and promotions.

In addition, changes to terms and conditions of service must be filed at the PUCO 30 days in advance; traditional telephone companies must continue to offer stand-alone basic local service; and customers must be notified 15 days in advance of rate increases, changes in terms and conditions and other modifications. — Case No. 06-1345-TP-ORD

Wholesale Telephone Rules Reviewed

Rules that govern the wholesale aspects of providing competitive telephone service in Ohio were reviewed by the PUCO. OCC advocated for residential consumer safeguards and protections. These rules are known as the carrier-to-carrier rules.

The OCC believes that residential consumers benefit from a robust competitive telephone market in Ohio, but proper rules must be in place for how the various carriers interact with each other.

Based on the OCC’s review of the PUCO staff’s draft rules, specific enforcement measures were not included. The OCC sought to ensure that measures be included within the rules so that there would be no doubt as to the potential penalties for violators.

To help provide consumers with a reasonable time to make important telephone decisions, the OCC argued that customers signing up for new local service should have 90 days to choose a long-distance provider without incurring a switching fee. The PUCO staff’s proposal would have forced customers to make an immediate and potentially uneducated choice.

The OCC sought to have rules dealing with customer’s changing carriers apply to all local telephone companies. The PUCO staff’s proposal only covered competitors, not the traditional local companies (incumbents).

In addition, the OCC proposed that it should be provided notice when a competitor’s access to local telephone facilities is going to be terminated. Since the impact would be that customers would lose local service, providing notice to the OCC, which is the residential utility consumer advocate, would help it educate consumers and better address complaints and questions.

When final rules were adopted by the PUCO, most of the OCC’s key issues were not implemented. No specific enforcement provisions were enacted and the rules failed to provide adequate time to choose a long-distance provider. In addition, the switching rules have no applicability to incumbent carriers.

In a small but important victory, the OCC will be notified prior to the termination of a competitor’s access to facilities used to serve residential consumers. — Case No. 06-1344-TP-ORD

 

 

Home Water Consumer Hotline