California Public Utilities Commission San Francisco, California August 1995 PHONE SERVICE FOR EVERYONE THE FACTS ABOUT UNIVERSAL SERVICE WHAT IS UNIVERSAL SERVICE? Universal Service means providing virtually everyone in the state with a basic level of telecommunications services at reasonable rates. It ensures that low-income customers and customers in areas that are expensive to serve (like mountain communities or less populated areas) receive the same access to services as other customers. Universal service is not a new idea. As described later, universal service programs have been in effect for some time. This fact sheet provides a summary of the issues and proposed rules contained in the CPUC proposal which would govern all telecommunications carriers in California that provide basic telephone service. THE LOCAL COMPETITION SITUATION Currently, there is only one company providing local phone service in your area. However, in 1994, the California Legislature passed Assembly Bill 3606, allowing other companies to offer local phone service by January 1, 1997. Local telephone competition will allow you to choose a local telephone company the same way most people now choose their long-distance company. Rules recently issued by the California Public Utilities Commission (CPUC) will allow long-distance service providers, cable television companies and other companies to become competitive local telephone companies as early as January 1, 1996. These companies will be able to offer local telephone services in addition to their current service offerings. Local telephone competition is expected to lower costs for you, the consumer, while giving you the choice of newer, high quality services, in addition to basic telephone service. This competitive marketplace will foster economic growth and lead to an improved telecommunications infrastructure for California. What the CPUC is doing for you Principles guiding the Commission: Ensuring that high-quality basic telecommunications services remain available and affordable to all Californians regardless of geographic, linguistic, cultural, ethnic, physical, or income considerations; Providing consumers with the ability to choose among competing telephone companies; Providing for the addition of new services to the basic service package as these new services become more widely used, in order to avoid some people having inferior access to information compared to others; Ensuring that customers have access to sufficient information to make informed choices about basic service and universal lifeline telephone service; and Ensuring that telephone companies follow reliability, privacy and security guidelines. THE CPUC UNIVERSAL SERVICE PROPOSAL Background The prospect of local telephone competition has raised some concerns about a telephone company's "universal service" responsibilities in a competitive environment. In 1994, the California Legislature passed Assembly Bill 3643, which requires the California Public Utilities Commission, the state agency which regulates telephone companies, to develop universal service policies in a competitive environment. The CPUC recently issued proposed rules for public comment which outline its plan for maintaining affordable, high quality service within a competitive environment. The Commission released proposed rules on July 17, 1995, (Decision 95-07-050) for public comment. The document outlines the definition of minimum basic service, methods for subsidizing high cost service areas, discounts for low-income consumers, and the need for consumer information. A final set of rules will be developed following public hearings, filing of comments regarding the proposed rules, and following any evidentiary hearings and/or legislative changes, if necessary. What is Basic Service? Basic service is the set of features and capabilities consumers expect when they order telephone service. Basic service is not static, but changes over time. In the proposed universal service rules, the Commission proposes a definition of what basic service is now, and how it may change over time to include new services. The Commission proposes that basic service should include what Californians have come to expect when they order telephone service. This includes a connection to the telephone network (the ability to place and receive calls); access to the larger telephone network, such as access to long distance carriers and information services; free access to 911 emergency services; touch tone dialing; and billing options, such as choice of flat and measured service. As technology advances, new services will be offered. Over time these services may become so commonly used that they may be considered essential. Touch tone was once considered a premium service. Over time it became widely used and essential for many activities. Touch Tone is now included as part of basic service. The Commission expects that other, more advanced services may also become essential. For this reason, the universal service rules propose reviewing the definition of basic service every three years. During these reviews the Commission will consider the following factors: (1) Is the service essential for participation in society? (2) Do a majority of residential customers subscribe to the service? (3) Will the benefits of adding the service to the basic service exceed the costs? What About Service To Less Populated Areas? Universal service also ensures that customers in areas that are expensive to serve (like rural and mountain communities) receive the same access to services as other customers. In areas that are expensive to serve, rates have been kept low in two ways. First, the California High Cost Fund (CHCF) reduces rates for customers of small telephone companies. All telephone customers currently contribute to the CHCF through a small charge on their monthly phone bill. Second, by requiring large telephone companies to charge the same rate for basic service within their territory, rates are kept at reasonable levels in their high cost areas. By introducing local competition, the Commission must consider new ways to keep rates at reasonable levels. Under the proposed universal service rules, if you live in a designated high cost area, you will be able to get a credit, or voucher, on your bill so your rates remain affordable. If there is more than one local telephone company serving your high cost area, you can receive a similar credit regardless of which telephone company you choose. The purpose of this credit is to ensure that rates remain affordable in areas where the costs of serving that community are high. The credit represents the difference between the cost of providing service in an area and the rate the Commission considers affordable. In order to receive this credit for the customers it serves, a company must be willing to accept an obligation to serve all customers in an area. To fund this universal service voucher program, the Commission proposes a charge based on telephone company revenues. Unlike the current high cost fund, no direct charge would appear on your bill. What About Low-Income Consumers? Another aspect of universal service is providing lower rates for low income customers. The current Universal Lifeline Telephone Service (ULTS) program for low income consumers will remain unchanged, with the exception that it will be expanded to offer the choice of ULTS providers. Eligible low income customers will continue to pay either $5.62 for residential flat rate service, or $3.00 for residential measured service throughout the state. This program is funded by a small charge on all telephone bills. What Information Do Customers Need? The CPUC is concerned about what information consumers need to make informed choices about competing local telephone companies. It proposes that all local phone companies must provide customers basic service information in a standard format. Consumers will then be able to make easy comparisons between basic service rates of different local phone companies can be easily compared. This is similar to the way credit card companies present their rates. CONSUMER PROTECTIONS The CPUC recently established consumer protection rules governing new local telephone companies in a related, ongoing CPUC proceeding. These are interim rules, and will become effective January 1, 1996. Consumer protection rules govern rate increase notice requirements, disclosure of information to consumers when signing customers for service, required procedures for handling billing complaints, requirements for printing on bills information on how to receive help, customer deposit return requirements, rules to provide for easy credit establishment, privacy protection rules, and free blocking of 900 and 976 information service requirements. HOW YOU CAN GET INVOLVED The CPUC wants your comments on its proposed universal service rules. To provide an opportunity for comment, we will be holding public hearings throughout California in September and October (as listed below). The meetings will consist of a 15 minute presentation by Commission staff, followed by an open public comment period. Comments can be oral or written and CPUC staff will be available to respond to your questions. September 20, 1995 7:00 p.m., Los Angeles State Office Building, 107 South Broadway Auditorium September 26, 1995 7:00 p.m., San Bernardino City Hall , 300 North "D" Street Council Chambers September 27, 1995 7:00 p.m., Barstow City Hall, 220 E. Mountain View Street Council Chambers September 29, 1995 7:00 p.m., San Francisco State Office Building, 505 Van Ness Avenue Auditorium October 2, 1995 7:00 p.m., San Diego County Board of Supervisors, 1600 Pacific Highway Board Room, Room 310 October 5, 1995 7:00 p.m., Fresno State Office Building, 2550 Mariposa Mall Auditorium October 11, 1995 7:00 p.m., Roseville Maidu Community Center, 1550 Maidu Drive October 12, 1995 7:00 p.m., San Jose City Council, 801 North First Street Council Chambers October 12, 1995 7:00 p.m., Volcano Armory Hall, #2 Consolation Street October 19, 1995 7:00 p.m., Redding City Council, 1313 California Street Council Chambers October 24, 1995 7:00 p.m., Eureka County Courthouse, 825 Fifth Street Board of Supervisors Chambers HOW TO CONTACT US If you cannot attend one of the hearings, but would like to submit written comments, please write to: The Public Advisor California Public Utilities Commission 505 Van Ness Ave., Room 5303 San Francisco, CA 94102 or send electronic mail to: public.advisor@cpuc.ca.gov Mention that you are writing about "Universal Service Rules" (D.95-07-050). Indicate if you wish a written response, otherwise no reply will be sent. Your letter will be forwarded to the Commissioners and will become part of the formal correspondence file for this proceeding.