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Press Release Thursday, June 4, 1998 |
Contact: Janee Briesemeister or |
AUSTIN, TX -- Almost eight months after the federal government removed the cap on local coin rates at pay phones, Consumers Union surveyed 184 pay phones in Texas (166 in the greater Austin area) and found consumers often paying high prices in a confusing market.
Last October, the Federal Communications Commission removed the cap on local pay phone coin rates, yielding to industry claims that competition among the numerous pay phone providers would more effectively cap costs and give consumers more and better options. Instead, rate information is confusing or unavailable and few pay phones compete directly with other pay phones at the same or nearby locations.
"Why should rate deregulation be an exercise in self-defense for pay phone consumers and a futile one at that?" said CU Senior Policy Analyst Janee Briesemeister. "Government oversight must be maintained to ensure that pay phone owners and carriers do not abuse customers through high rates and by failing to disclose price information required by law."
Consumers Union surveyed 166 pay phones in and around Austin to determine whether competition exists at the consumer level--two nearby phones competing based on the cost of a call, for example. The report looked at the cost and quality of service of the pay phone operators and examined an alternative to pay phone local and long distance companies: prepaid calling cards.
The report found that Southwestern Bell and AT&T are still the dominant local and long distance operators in the market and control major phone locations (like airports and malls), while smaller companies are comparatively over-represented in low income areas. These smaller players often offer lower coin rates for long distance calls, but they do not always provide access to a local operator (as required by law) and the long distance operator’s charges for collect and credit card calls can be exorbitant.
"Pay phones provide a valuable public service," said Briesemeister. "Not everyone can afford a wireless phone or can get access to their wireless service in remote areas. For a significant portion of the population pay phones are a necessity."
Among the report’s key findings:
"Consumers are virtually left on their own to navigate the pay phone market," the report said. "Although the FCC believes that the pay phone market is competitive, our survey has shown that consumers … have little competitive choice in the traditional sense."
Among the report’s recommendations:
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," she said.
Consumers Union supports a bill introduced in Congress by Sen. Patrick Leahy, D-Vt., requiring 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.
Leahy’s legislation also calls on the Federal Trade Commission to investigate possible monopolistic practices by the pay phone industry. Based on those findings, the bill directs the FCC to reconsider its rules under which the FCC removed authority from states to regulate local pay phone rates.
