Consumers Union

The Texas Office of Public Utility Counsel

Consumer Federation of America

Press Release Wednesday, October 20, 1999	Contact: Gene Kimmelman (CU): 202-462-6262 Mark Cooper (CFA): 301-384-2204 Laurie Pappas (TOPUC): 512-936-7500 Consumers Union Washington, DC Office

WASHINGTON, D.C. - Consumers Union, the Consumer Federation of America, and the Texas Office of Public Utility Counsel (Joint Commentors) filed reply comments to the long distance industry with the Federal Communications Commission (FCC) on Wednesday. The Joint Commentors dispute industry claims that long distance rates are the lowest they have ever been to the benefit of all consumers and that low-income, low-volume consumers are not being disproportionately affected by increasing bottom-of-the-bill charges. Rigorous analysis by the Joint Commentors reveals that, contrary to industry assertions:

· The majority of residential long distance consumers are actually paying more today for the same amount of calling made right before the passage of the Telecommunications Act of 1996; and

· low-income, low volume users are hardest hit by the increasing bottom-of-the-bill charges (i.e., the monthly minimum usage charge, the presubscribed interexchange carrier charge and the universal service fund charge), shouldering an increase that is at least twice as large as wealthy consumers.

These reply comments are part of the Federal Communications Commission proceeding investigating the impact of recent bottom-of-the-bill charges on residential long distance customers. Unfortunately the long distance industry presented the Commission with boisterous rhetoric about competition rather than sound analysis of the affect of these recent fixed charges on the residential long-distance market. Analysis by the Joint Commentors shows that 71 percent of poor households; 64 percent of lower-middle income households; 58 percent of middle income households; 50 percent of upper-middle income households; and 43 percent of wealthy households have shouldered a net increase in their long distance bills. According to the Joint Commentors, residential consumers with below average long distance use, about 70 million households, are paying a net annual increase of about $2.3 billion.

"The industry mischaracterizes the long distance market as one where all consumers are benefiting from the FCC's implementation of the Telecommunications Act. However," explains Laurie Pappas, Deputy Public Counsel with the Texas Office of Public Utility Counsel, "when you look at the monthly bottom line, one half to two-thirds of all residential consumers are seeing increasing telephone bills."

In this proceeding, the long distance industry mistakenly argues that there is little to no correlation between income and low-volume long distance usage. "This conclusion is simply wrong," counters Mark Cooper, Director of Research with the Consumer Federation of America. "The data in evidence before the Commission, including data used by the industry, show that low-income consumers are much more likely to be low-volume consumers, with wealthy households making between two and three times as many calls as poor households."

The data on income and long distance usage also reveal a disproportionate price impact on the poor with about 70 percent of the poorest Americans shouldering a net increase in their long distance bills while about 60 percent of the wealthiest Americans enjoyed a net decrease. "This blatant price discrimination in long distance service, where the most vulnerable consumers are crushed by rate increases, is simply not what Congress intended with the passage of the Telecommunications Act of 1996," concludes Gene Kimmelman, Co-director of Consumers Union.

The Texas Office of Public Utility Counsel is the Texas state consumer agency designated by law to represent residential and small business consumer interests of the State. The agency represents over 8 million residential customers and advocates consumer interests before Texas and Federal regulatory agencies as well as the courts.

Consumers Union is a nonprofit membership organization chartered in 1936 under the laws of the State of New York to provide consumers with information, education and counsel about good, services, health, and personal finance; and to initiate and cooperate with individual and group efforts to maintain and enhance the quality of life for consumers. Consumers Union's income is solely derived from the sale of Consumer Reports, its other publications and from noncommercial contributions, grants and fees. In addition to reports on consumers Union's own product testing, Consumer Reports with approximately 4.5 million paid circulation, regularly, carries articles on health, product safety, marketplace economics and legislative, judicial and regulatory actions which affect consumer welfare. Consumers Union's publications carry no advertising and receive no commercial support.

Consumer Federation of America is the nation's largest consumer advocacy group, founded in 1968. Composed of over 250 state and local affiliates representing consumer, senior citizen, low-income, labor, farm, public power, and cooperative organizations, CFA's purpose is to represent consumer interests before the congress and the federal agencies and to assist its state and local members in their activities in their local jurisdictions.