Telecom-Request%usc-eclc@brl-bmd.UUCP (Telecom-Request@usc-eclc) (11/19/83)
TELECOM Digest Saturday, 19 Nov 1983 Volume 3 : Issue 103
Today's Topics:
access charges
actual costs.
more 718 follies
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Date: 18 November 1983 00:16 EST
From: "Marvin A. Sirbu, Jr." <SIRBU @ MIT-MC>
Subject: access charges
Jon is concerned that people might drop off the network if local rates
go up. He is also concerned that CALLERS benefit if I have a phone,
and might be willing to subsidize my basic cost so that I will decide
to stay on the network and therefore can be reached. Let's look at
these two arguments separately.
The proposal in Congress attempts to keep local rates down by making
long distance callers pay for basic NTS plant. This scheme ends ups
subsidizing not only poor people, who might give up their phone
service, but also rich people, who can well afford to pay the true
cost of their NTS plant. In other words, because 5% or 10% of the
subscribers might drop off the network if they had to pay the cost of
their service up front, we're going to design a system that subsidizes
100% of the subscribers. This hardly seems like the most sensible
approach. One could eliminate the access charge just for poor people,
or just for the elderly, without eliminating it for everyone.
One can also use a declining block rate. Consider electricity
pricing. Just as with the telephone there's some fixed cost for
running the wire to your house. That cost is recovered through usage
charges. However, the usage charges decline with increasing number of
killowatts consumed, so that large users aren't paying 3 or 4 times
the actual cost of electricity. One could do the same thing with
telephone charges.
As to the problem of people staying on the network, the FCC access
charge decision recommends that evey state PUC offer some form of
"lifeline" service.(They can't require it because legally its up to
the States.) Lifeline service has a very low fixed cost per month,
but recovers NTS costs through usage charges on *all* calls, not just
long distance. In other words, it's a form of local measured service.
If you only need a phone so you can be *reached*, you can have it
cheaply. If you don't make many local calls, clearly a lifeline rate
won't cover the costs of your NTS plant. The shortfall will have to
be made up by people who do make lots of calls. But one doesn't need
to give people a low rate for unlimited calling just to get them to
stay on the network; one can give them a low rate for limited calling.
If you do the latter, people who really *can* afford to pay the full
cost of their NTS plant will order unlimited service and pay the cost
up front.
The problem with saying "let business pay for it" is that ultimately,
we consumers end up paying for it in the cost of the products and
services business supplies. And I resent the idea that my long
distance bill is subsidizing Jon's second phone that he uses only for
local calls to a TAC. I see no public policy reason why he should be
subsidized.
Marvin Sirbu
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Date: 18 November 1983 00:33 EST
From: "Marvin A. Sirbu, Jr." <SIRBU @ MIT-MC>
Subject: actual costs.
The nationwide average cost for the Non Traffic Sensitive plant (your
handset, inside wiring and the local loop from your house to the
switch, and the line card on the switch) is $25 per month. In rural
states such as Nevada or Montana it can average $50 per month. The
typical $10-15 per month that most residences pay for minimal service
falls far short of the true cost.
The $25/month is not just for maintenance. The cost of installing Non
Traffic Sensitive plant was probably about $1000. If you assume 20
year depreciation and a 12% interest rate, that works out to about $15
per month just to pay off the capital cost. That leaves $10 a month
for maintenance and perhaps the cost of billing, since billing does
not depend on usage.
In Japan when you get phone service installed for the first time in a
house you are required to loan the phone company the $1000 it costs to
run the wire to your house: they make you buy phone company bonds. In
Egypt you simply pay a $400 installation bill up front.
Note that if you have electricity wires run to your house in the
woods, you pay up front for the cost of your wiring. The phone
company, however, has traditionally fronted the cost and recovered the
investment through monthly charges. Until recently, installation
costs in a new house were under $50.
As for the usage sensitive plant -- local switches and inter-office
trunks -- the average user probably accounts for about $5-10 per month
worth.
Marvin Sirbu
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Date: 18 Nov 1983 1024-EST (Friday)
From: ulysses!smb@Berkeley (Steven Bellovin)
Subject: more 718 follies
As has been mentioned previously, there is a fair amount of opposition
in New York to splitting the city into two area codes, 212 and 718. A
consultant retained by the city now suggests that (a) 718 be used for
"special purposes", such as computers and paging devices, and (b) that
an 8-digit dialing plan be instituted in the rest of the city....
NY Telephone says that that option would cost $150,000,000 (as
compared with $25,000,000 for their plan). I'm surprised it's that
cheap.
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End of TELECOM Digest
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