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WASHINGTON and AUSTIN, TX -- On the six-month anniversary of a Federal Communications Commission order deregulating pay phone rates, Consumers Union -- publisher of Consumer Reports -- today said the order has been an invitation to price gouging and lauded a bill that targets windfalls collected by pay phone providers whose telephones don't offer change to their customers.
"During the six months since the FCC's deregulation order took effect, consumers have been saddled with pay phones that cost more and keep the change without the improvements in service and availability promised by the FCC," said Janee Briesemeister, a senior policy analyst with CU's Southwest Regional Office in Texas. "We believe the FCC's deregulation order was just plain wrong."
A bill introduced last week by Sen. Patrick Leahy, D-Vt., requires pay phone companies which charge more than 10 cents for local calls to provide consumers with cash change or other alternatives. In lieu of this, the bill would allow states to receive credit -- equal to the value of the unpaid change -- to help fund public interest payphones that promote the public interest such as safety, health, emergency services, education, or in nursing homes.
Said Leahy: "For millions of Americans, pay phones are a necessity. For millions more they are an important convenience. No customer should be fleeced, if we can do something about it. And we can."
"It's our change and they should have no business keeping it," CU's Briesemeister said. "It's both annoying and wrong. I don't know of too many consumers who voluntarily tip their phone companies. For families who rely on pay phones regularly, this pocket change adds up to real money rather quickly."
Leahy's legislation -- "The Consumer Pay Phone Protection Act of 1998" -- also:
Briesemeister said consumers are largely a captive audience when they use pay phones. They either use the pay phone at hand or have to walk or drive to another location which may not necessarily have cheaper rates. And now they need to have exact change or they will end up throwing money away that pay phone providers are all too happy to collect.
"This bill challenges the FCC's theory that there is competitive choice for consumers of pay phone services," Briesemeister said. "It shouldn't be hard for regulators to figure out what consumers already know: Pay phones are monopolies based on location and a deregulated monopoly is an invitation for price gouging."
Soon after the FCC's deregulation order of October 7, 1997, many phone companies raised their pay phone rates typically from a quarter to 35 cents without offering change to their customers. In some parts of the country where rates were 10 cents per call, a consumer today stuck with the wrong coins could end up paying 50 cents a 500% increase.
