Order 15538 - NYNEX: Motion to Withdraw Business Link Service

 

STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS

PUBLIC UTILITIES COMMISSION

Report and Order

On April 23, 1997, the New England Telephone & Telegraph Company, d/b/a NYNEX ("NYNEX") filed with the Public Utilities Commission ("Commission") certain tariff revisions. The filing included several disparate elements: introduction of a late payment charge ("LPC") applicable to business customers only; introduction of a returned check charge ("RCC"); elimination of announcement lines; expansion of the Rhode Island Statewide Calling Plan ("SCP") to include a 25% discount on all customer-dialed credit card calls; elimination of the one-time connection charges for residence Selection Calling and the SCP; introduction of a discount on business local usage for qualified customers through the Business Link Service ("BLS"); elimination of Digipath Digital Service; a decrease in the monthly rate for residence additional listings; an increase in the Busy Line Verification/Busy Line Interrupt rates, Operator Dialed Person-to-Person and Customer Dialed-Calling Card Incremental Charges, most analog Private Line Service rates; Superpath 1.544 Mbps Local Distribution Channel and Interoffice Channel OPP month-to-month rates, and selected superseded analog Centrex monthly rates; a decrease in the Pack Switch Port 1.544 Mbps Frame Relay Service monthly rate; elimination of the Farm Intercom System service; and certain minor text corrections. The Company indicated that the annual revenue effect associated with the filing was ($4,209,282).

On June 13, 1997, a hearing was conducted at the offices of the Commission, 100 Orange Street, Providence. The following appearances were entered at that time:

FOR NYNEX:                         John B. Messenger, Esq.

FOR THE DIVISION:             Alan M. Shoer, Esq.

Special Assistant Attorney General

FOR MCI:                               Alan Mandl, Esq.

FOR AT&T:                            Melinda Thaler, Esq

Jay E. Gruber, Esq.

FOR THE COMMISSION:     Adrienne G. Southgate

General Counsel

NYNEX called Paula L. Brown, Managing Director of Pricing, and Theresa L. O'Brien, Director - Regulatory for NYNEX-Rhode Island to support the filing. Ms. O'Brien described the filing, noting that the Price Regulation Plan ("PRP") requires annual filings on October 15. NYNEX is permitted to make interim filings at any other time, provided they comply with the terms of the Plan. The overall average effect of the instant filing would be a reduction of prices of approximately 1.8%.  [1 Average prices for Service Group 1 decrease by about 4%, while average prices for Service Group 4 increase by about 2%.]  Ms. O'Brien described BLS as an optional volume discount on business local usage, introduced because customers expressed an interest in reducing the cost of local calling. She explained that BLS was optional, because NYNEX wanted customers to know that they were receiving a discount. BLS has been approved in Massachusetts, Maine, and New York.

Ms. O'Brien and Ms. Brown led the Commission and intervenors through the application of BLS, giving several examples. Following this testimony, as well as the comments of MCI and AT&T, the Commission announced from the bench that it would suspend the BLS for a six-month period, from and after its proposed effective date of June 23, 1997. However, NYNEX indicated that, with the removal of BLS, the remainder of the filing would not be in compliance with the PRP.

The hearing continued, with consideration of the LPC and RCC. Ms. O'Brien gave NYNEX's position that neither charge is, or should be, classified as a "new service" within the definition of the PRP. The Division had taken the position that both charges were "new services". If the Commission were to agree with the Division's position, even in the absence of BLS, the filing would comply with the PRP.

"New services" are defined in the PRP, in Subsection (H). They must meet a three-pronged test to qualify:

- the service must not be currently offered for a charge by NYNEX in Rhode Island;

- the service must not be an interconnection service; and

- the service must not replace an existing tariffed service.

A strict application of the three-part test would categorize the LPC and the RCC as new services, since they do not currently exist, are not interconnection services, and do not replace existing tariffed services. However, assessing fees for customer delinquencies falls outside the realm of "service" in the colloquial meaning of the term. Ms. O'Brien said that NYNEX considered "services" to be things which a customer could order, such as a new feature or functionality of the network.

The Division presented Brian Kent as a witness. Mr. Kent noted that the PRP also defines the term "service" in Subsection (C), as:

Any one of the several individual telecommunications products which NYNEX offers to the telecommunications market in Rhode Island and for which one or more rate elements apply.

"Rate element" is defined in Subsection (D), as:

An individual price rate or charge identified in NYNEX tariffs on file with the Commission.

Mr. Kent concluded that "service" should be construed to extend to every rate element, and that every charge NYNEX lists in its tariffs must be included in the API calculation. Since both the LPC and the RCC are rate elements, and would be tariffed, Mr. Kent declared them to be services. However, since he deemed them to be "new services", the revenue derived from the two charges would not be factored into the API.

There was testimony that NYNEX must "float" $92,000,000 in late payments for business customers, per annum, which was the impetus for introducing the LPC and the RCC. The witness was asked to express his opinion regarding whether these charges might more properly be contained within the Company's approved Terms and Conditions, rather than within the PRP. Mr. Kent responded that the concept of the Plan "encompasses everything", and so any revenue stream must be reflected in the API.

In closing arguments, Mr. Messenger contended that the PRP regulates price changes, but not other changes to NYNEX revenues.

The Commission considered the tariff changes at an open meeting on June 17, 1997. The Chairman noted receipt of a letter from Mr. Messenger, summarizing NYNEX's record adoption of the Division's recalculated API as well as the Company's agreement to either treat the LPC and RCC as "new services" or to include them in the Company's terms and conditions. The letter also sought permission to withdrawn the BLS, without prejudice to its resubmission at a later date.

The Commission granted the motion to withdraw the BLS filing, without prejudice. The balance of the interim PRP filing was approved, with the proviso that the LPC and RCC would not be included in the API.

At a second open meeting on February 25, 1998, the Commission considered the policy issue of price vs. revenue regulation. Two of the commissioners favored treating the LPC and the RCC as items properly includable in the terms and conditions, and excludable from the API.

Accordingly, it is

(15538) ORDERED:

1. The motion filed by the New England Telephone & Telegraph Company, d/b/a NYNEX, to withdraw its Business Link Service, is hereby granted without prejudice.

2. The balance of NYNEX's April 23, 1997, filing is approved.

3. The Late Payment Charge and Check Return Charge shall be treated as terms and conditions, and are not includable in the Actual Price Index.

EFFECTIVE AT PROVIDENCE, RHODE ISLAND PURSUANT TO OPEN MEETING DECISIONS ON JUNE 17, 1997 AND FEBRUARY 25, 1998. WRITTEN ORDER ISSUED FEBRUARY 26, 1998.

PUBLIC UTILITIES COMMISSION