TELECOM Digest Mon, 18 Jan 93 08:36:00 CST Volume 13 : Issue 30 Index To This Issue: Moderator: Patrick A. Townson Re: OBT and Flat-Rate Service (tanner@ki4pv.compu.com) Re: OBT and Flat-Rate Service (John R. Levine) Re: OBT and Flat-Rate Service (Maxime Taksar) Re: OBT and Flat-Rate Service (Jeff Sicherman) Re: OBT and Flat-Rate Service (Patrick Lee) Re: OBT and Flat-Rate Service (John Higdon) Re: OBT and Flat-Rate Service (Joshua E. Muskovitz) ---------------------------------------------------------------------- From: tanner@ki4pv.compu.com Subject: Re: OBT and Flat-Rate Service Organization: CompuData Inc., DeLand Date: Sun, 17 Jan 93 22:29:39 GMT Do not be surprised if the phone company does push for elimination of flat rate calling. They will cite the old argument that one should pay for what one uses, and that low-usage customers subsidize the high usage customers. The problem with this argument is that off-peak phone service (and most residential use is off-peak) does not really cost much to provide. It costs more to meter the service than to provide it, because the physical plant is already installed to deal with the peaks. The cost of phone service may be divided into several broad areas: (a) power (b) accounting functions (billing &c) (c) operator services (d) outside wiring, from office to customer premises (e) inside plant (switches &c.) Let us consider each in turn. Power consumption is negligible. Commercial power costs pennies per Kw/H, and the power requirement is so small that phone companies have been known to satisfy it with batteries. Figure less than a penny per hour, and Florida Power is not known for its altrusim. Accounting functions are largely automated. Humans do not tally your phone calls any more; instead, a computer generates a long tape which is sent to be processed into bills. A human does answer the phone when you call to complain about being over billed. Also, there is a certain cost to generating an itemized bill, amounting to some measurable fractions of a penny per line. If you require accounting on measured service, this can add up. Figure a cost of several cents per page to print a bill showing the measured calls. Figure a small cost in computing, as well, to figure out how much measured service you used even if you do not demand an itemized bill. It is the availability of computers to generate bills which make measured service possible: other costs of providing service would not be worth metering. Operator services are generally billed, and should be at least self-liquidating. Services to work around faulty equipment should be charged against that portion of the plant which has failed. Reference to tarriffs, along with an estimate of time required for service to yield dollars per hour, should be enlightening. Careful measurement and calculation has determined the optimum number of operators on duty at any one time. Outside wiring does not wear out faster if you are talking and more slowly if the phone is on-hook. Unless you have a party line, the wiring is there unused if you are not talking on the phone, so usage does not affect this. This is a fixed cost, however, and is non-zero. You should expect a calculable cost to maintain the wires from the office to your house, and this may be a large portion of your phone bill. In addition to maintenance, you should expect to pay a "cost of money" charge to pay for the original installation of copper between the office and your house; again, this should be a calculable fixed monthly charge. The inside plant is different. Switch capacity is generally a fraction of what would be required if all of the outside plant wanted to talk at once. (To demonstrate, hit an important power pole with a large truck, then try to get dial tone.) The reason that the switch capacity is a limited is simple. They figure out what will be required during peak periods, add a fudge factor, and that's the amount of inside plant purchased for the office. If you are talking during the peak period, you are pushing up the requirement for inside plant. Off-peak, most of the capacity sits idle. When are you at home talking to your friends (or, to cite a favourite example, calling the BBS at the opposite end of the local calling area)? After work, during the off peak hours. Thus, the argument that measured residential service means that you are paying for what you use, is unconvincing. Of course, it sounds good on the surface, and many PUC commissioners will buy it, but for residential service it is not true. So long as the marginal cost of providing off-peak local calls (outside of the effort of metering them) is best measured in the tenths of pennies per hour, and the fixed cost of maintaining physical plant dominates, then it is reasonable to base the charges on the fixed cost. A form of measured service which only charged for peak-hours usage would be reasonable, however, because it would be taking into account the requirement for increased physical plant. An unmetered option here may turn out to be cheaper: just charge a fee for peak-hour access equal to the expensed cost of providing added inside plant. The reason that this may prove cheaper is that you avoid having to track usage and do not have to totalize and generate billing information. You may want to watch the PUC in which you are interested. Surely, if the phone company has expressed interest in going all-metered, the matter will not drop. If you have an appointed PUC, as we now do, they will tend to be fairly responsive to the utilities and less responsive to the rate payers. In order for the rate payers to have any effect at all, they will have to watch carefully and be sure to timely file all testimony. ------------------------------ Subject: Re: OBT and Flat-Rate Service Organization: I.E.C.C. Date: 17 Jan 93 18:10:40 EST (Sun) From: johnl@iecc.cambridge.ma.us (John R. Levine) > [Moderator's Note: I've never understood why people had such a big > objection to simply paying for the service they use. This has been argued to death, so I don't suggest that we flood telecom with it, but there is very little connection between the actual cost of providing local exchange service and the message rate plans that telcos offer. Apparently a reasonable message rate for intra-CO calls would be something like one cent per ten minutes, not the two cents/minute or so that most message rate plans charge. There's no reason that people who make long BBS calls at night should pay more, since they're using capacity that is certainly unused at that hour. What would make economic sense is something like the way that industrial customers pay for electricity: partly charge per use, but mostly charge for maximum demand, e.g. your bill is largely based on how much you're on the phone at peak hours like 10AM and 2PM. But good luck explaining that to regulators or POTS users. The NYC plan where you pay for the number of local calls regardless of length also makes some sense, since setting up the call is usually the most expensive part. Regards, John Levine, johnl@iecc.cambridge.ma.us, {spdcc|ima|world}!iecc!johnl ------------------------------ Date: Sun, 17 Jan 93 18:34:37 -0800 From: mmt@RedBrick.COM (Maxime Taksar KC6ZPS) Subject: Re: OBT and Flat-Rate Service In article , PAT writes: > [Moderator's Note: I've never understood why people had such a big > objection to simply paying for the service they use. We've had no flat > rate service in Chicago outside a very small local area for many > years, and for most subscribers, the cost for phone service actually > went *down* when they were no longer forced to pay for all the modem > users who went through thousands of units a month at flat rate. > Naturally, the guys who spent hours every night on a modem calling BBS > lines on the other side of the area code (or even inter-area code; our > old flat rate plans took in 312/708 and parts of 815/219/414) squealed > like pigs when the change was announced; *they* had to start paying > their way ... the 90 percent plus of our population which does not use > modems or make hundreds (or thousands) of calls each month was very > pleased to see a reduction in their bills. When IBT ditched almost all > the flat rate stuff a few years ago, the biggest objections came in > the form of countless articles on BBS message bases from people talking > about the greedy and awful old telco. Count me as one who approves of > 'pay for what you use'; I don't like paying subsidies for my neighbor's > use of the phone. I don't do it for the electricity, water or gas they > use, why should I for their phone calls via flat rate, averaged out > pricing? But then again, I don't run war dialers against entire CO's > or call computer chat lines in the outer fringes of 708/815. PAT] This is a very nice theory, Pat, but you have, once again, conveniently forgotten that a "unit" is not an actual, tangible item or product. What we, as telephone consumers, are paying for is network capacity. (Including the wire plant to our doorstep, switching capacity, and various features). The capacity is there whether we use it or not. Remember who uses the most capcity, and therefore determines how much must be there? Yes, they're commercial users. These are the same commercial users that for the most part use this capacity only during the business day. Any amount of money that the telco gets for off-peak usage is just icing -- if they didn't get it, it would not change how much they would get or how much they would spend on peak capacity. Do you really want to be subsidising the peak-period users, Pat? That's exactly what you're doing. I am one of those dreaded modem users, but I use it only during off-peak hours. I also strongly agree with you in that we should pay for what we use. I propose the following solution: All lines should be measured, *however*, there should be a significant (e.g. 60%) discount for calls made during near-peak periods (i.e. evenings) and a 100% discount for off-peak periods (i.e. nights, weekends). What if "near-peak period" usage starts to approach the levels of "peak period" usage? Reclassify the times that the discounts apply (with approval of the PUC, of course). This would be much closer to true pay-for-what-you-use system than the all-lines-always-measured system. Maxime Taksar KC6ZPS mmt@RedBrick.COM [Moderator's Note: Well, IBT does give discounts. Telco says we must pay for what we use, but they do give it away a lot cheaper if we use it at night and weekends. I think the overnight discount is 40 percent off of day rates. Seems fair enough. PAT] ------------------------------ Date: Mon, 18 Jan 1993 02:20:16 -0800 From: Jeff Sicherman Subject: Re: OBT and Flat-Rate Service Organization: Cal State Long Beach In response to Rob Knauerhase's posting of a local (to Ohio) news item, the ever-ready Moderator sayeth: (Quote deleted, see earlier message this issue.) There's probably little doubt that BBS's and their callers use more than their share of phone network bandwidth but at times when the network is rather lightly loaded, so I think the attack is a little misplaced. Given the costs of building and running the network and the relation of those costs to peak usage (as a measure of sizing and support) rather than overall usage, I don't see that you are realistically subsidizing anyone, especially if a lot of *your* activity is business realted during the daytime peak periods. This all comes back to the fact that, for the most part, there is no competition in the local loop so that prices that the Baby Bells charge reflect more on their desire for revenue and their ability to bamboozle utility commissions with legions of economists, lawyers, and lobbyists that those that would be produced by real competition. Hence, as John Higdon as pointed out before, this is all probably part of a strategic plan by the babies to eliminate flat rate service altogether by initially by making it economically more attractive and then eliminating the flat rate service when (virtually) everyone has been motivated to switch. They will then be free to start escalating per-unit/call charges. Jeff Sicherman ------------------------------ From: Patrick Lee Subject: Re: OBT and Flat-Rate Service Date: Sun, 17 Jan 1993 18:32:41 -0500 (EST) Our Moderator noted: > I've never understood why people had such a big objection to > simply paying for the service they use. We've had no flat rate > service in Chicago outside a very small local area for many > years ... Me neither. Most residents in New York City has untimed, but measured, rate service. Just about all the numbers in the 718/ 212 area codes are local to each other, with a few exceptions for border areas. I can't understand why so many phone companies out there still have flat rate service and that their customers don't mind (and now we have state legislatures trying to keep flat rates alive)! I for one like paying for what I use (and I do make over 300 local calls -- 10.6 cents a call with 40 and 65 percent discounts at different times). I have no problem with that even though I will probably be paying less with flat rate. I pay for what I use, fair is fair. Patrick ------------------------------ Date: Sun, 17 Jan 93 11:07 PST From: john@zygot.ati.com (John Higdon) Reply-To: John Higdon Organization: Green Hills and Cows Subject: Re: OBT and Flat-Rate Service On Jan 15 at 2:23, TELECOM Moderator notes: > [Moderator's Note: I've never understood why people had such a big > objection to simply paying for the service they use. Then allow me to give you some. After reviewing many different LEC proposals and conversions from flat rate to measured, a pattern emerges. While at the instantaneous moment of the proposal the move does appear to be revenue-neutral and simply shift costs from the "Aunt Marthas" to the mean and nasty "modem users". But once approved, the LEC is given great latitude with respect to the rates and charging methods relating to that measured service. In California, many residential customers were wooed into giving up unmeasured residential service for measured when it was pointed out how much money could be saved. What they were not told was that even as we speak there is a proposal before the PUC to DOUBLE the per-minute rate for local calls. Well, I suppose if you do not use the phone, this is no problem. But then why have one if you do not use it? A reality so far observed by the CPUC and the state telcos is that residential traffic as a class is far under the peak capacity required by business traffic, which universally pays for measured service. Usage of the local network between 8 PM and 8 AM (even by those despicable modem operators) is virtually down in the noise. For this reason, even business and other measured service customers are given an off-peak break. In my opinion, it should be free (included with the basic charge). The fact of the matter is that the price of no one's service would "go down" as the result of univeral measured service. This is a can of beans hinted at by telco to encourage passage of tariffs eliminating unmeasured plans. > We've had no flat rate service in Chicago outside a very small > local area for many years, and for most subscribers, the cost for > phone service actually went *down* when they were no longer forced to > pay for all the modem users who went through thousands of units a > month at flat rate. This is complete nonsense. During off-peak hours, people who do not use the phone never "subsidize" those who do. The network maintenance costs are present even if NO ONE used the telephone at all. A "unit" as you put it is not a commodity in the same fashion as an ounce of gold. If I pick up the phone and make a local call at 11 PM and it is not charged for because of my unmeasured service, there is not some tiny cost that is now spread over the other millions of customers in California. The cost to complete the call is zero and I was charged zero. The cost that we all share is maintenance of the plant. Business is charged for usage, because the construction of peak facilities is usage-determined, and measured service in this case spreads the burden equitably. > the 90 percent plus of our population which does not use modems or > make hundreds (or thousands) of calls each month was very pleased to > see a reduction in their bills. Oh? How much did your bill go down? If your service was degraded from unmeasured to measured at the same time, this was not a cost reduction but a forced COS change. > When IBT ditched almost all the flat rate stuff a few years ago, the > biggest objections came in the form of countless articles on BBS > message bases from people talking about the greedy and awful old > telco. In the information age it is natural for the telco to want to cash in big time. To do so on the back of the pioneers of that coming era (when indeed those same people are in NO WAY increasing the telco's cost of doing business) is to my mind completely reprehensible. You have obviously swallowed the "equitable sharing of costs" argument for mandatory residential service hook, line, and sinker. And, apparently, so have the Illinois regulators. At least in California, it is possible to have home access to electronic information without paying through the nose, having the telco limit your number of lines, or having telco otherwise stifle open residential use of the telephone. Mandatory measured residential service opens the door for another telco scam: Information Services. It is a simple matter for telco to offer dialup online services that carry no local charges. Competitors cannot do this except through the use of expensive 800 numbers. It has long been believed that compulsory measured service is a precursor to such inequitable arrangements. > Count me as one who approves of 'pay for what you use'; I don't like > paying subsidies for my neighbor's use of the phone. I don't do it for > the electricity, water or gas they use, why should I for their phone > calls via flat rate, averaged out pricing? A telephone call is not a cubic foot of gas, a KWH of electricity, or a cubic foot of water. All of these things are consumable commodities. A telephone call is not. While long distance has been traditionally priced in this manner, there are some valid, serious considerations that even this may need to be changed eventually. Your comparison to electrical, water, and gas usage is completely bogus, and your use of such tells me that you have read all of the IBT propaganda and have accepted it as gospel. > But then again, I don't run war dialers against entire CO's > or call computer chat lines in the outer fringes of 708/815. PAT] So what? How are the people that do this driving up IBT's cost, when they do it in the middle of the night? Particularly when they use a tiny fraction of the capacity that must be in place for the daytime traffic? When someone proposes a "measured day/unmeasured night" scheme, then let's talk. John Higdon | P. O. Box 7648 | +1 408 264 4115 | FAX: john@ati.com | San Jose, CA 95150 | 10288 0 700 FOR-A-MOO | +1 408 264 4407 ------------------------------ Date: Mon, 18 Jan 93 00:25:55 EST From: Joshua E. Muskovitz Subject: Re: OBT and Flat-Rate Service > [Moderator's Note: I've never understood why people had such a big > objection to simply paying for the service they use. We've had no flat I would suspect that it is because people consider local phone service to be a subscription service, just like the newspaper or cable TV. With the newspaper, you pay the same amount every day, regardless of the number of pages in the paper. Why not pay by weight, or by section? Why not pay for cable by usage? Because it is inherently more convenient for the USER to conceptualize the charge and prepare for it. It would annoy me every month if my local phone bill was different and I had to puzzle it out. How am I going to assure myself that I really made those calls? With my long distance bill, I can look at the city/number combos and identify 95+% of the calls immediately. Surely the LEC won't itemize the local bill, and even if they did, how am I going to find out the 555-1234 is that wrong number I dialed last month? I realize that from the LECs perspective, matered billing now makes sense because it is technically feasible. But so what? Why should a regulated monopoly get to annoy its captive audience simply for higher profits? josh. ------------------------------ End of TELECOM Digest V13 #30 *****************************