Testimony of-Continued Simon, Samuel A., executive director, Telecommunications Research & Sloan, John E., Jr., president and chief executive officer, National Feder- Stenholm, Hon. Charles W., a Representative in Congress from the State of Texas Swain, Frank S., Chief Counsel for Advocacy, Small Business Administration Wolfe, Robert M., director of special projects, BellSouth Corp., South Central Bell Telephone Co., and Southern Bell Telephone and Telegraph Co. Additional material supplied for the hearing record: Page 82 391 240 6 440 Allen, Ozle L., manager, Ben Lomand Rural Telephone Cooperative, Inc.: 435 Bissell, Keith, chairman, Tennessee Public Service Commission: Prepared 412 statement Bolter, Walter G., director, and James W. McConnaughey, research man- 364 194 Carver, Ken, vice president, Southeastern Telecom, Inc.: Prepared statement... Clark, Ronald J., vice president, Time, Weather, Temperature Advertis- Cooper, Jerry W., president, Cooper Manufacturing Co.: Prepared state- Dennis, Merlin L., president, Rural Telephone Service Co., Inc., and presi- 518 476 56 389 465 182 27 Eskind, Jane, commissioner, Tennessee Public Service Commission: Prepared statement.. 418 Faust, E.Q., vice president, corporate and Federal matters, BellSouth 344 Hagen, E. Bruce, president, North Dakota Public Service Commission: 160 Hicks, Michael E., Tennessee region staff manager, Telephone & Data 429 Keen, Jack C., president, Western New Mexico Telephone Co., on behalf Kraemer, Joseph S., partner, management consulting division, Touche- Lilly, James L., vice chairman, Texas State legislative committee, American Association of Retired Persons: Prepared statement.. 71 Moir, Brian R., counsel, International Communications Association: Prepared statement with attachments.. 248 Nourse, Roswell W. (Bill), owner, Brookmeade Hardware & Supply Co.: 472 Selwyn, Lee L., president, Economics and Technology, Inc.: Prepared statement 118 86 Simon, Samuel A., executive director, Telecommunications Research & Sloan, John E., Jr., president and chief executive officer, National Feder- Wolfe, Robert M., director of special projects, BellSouth Corp., South Central Bell Telephone Co., and Southern Bell Telephone and Telegraph Co.: Prepared statement... 393 10 443 APPENDIXES Page A.-Forum on the Impact of Telephone Charges on Small Businesses, September 14, 1984, Green Bay City Council Chambers 523 B.-Prepared Statement of Ronald J. Clark, vice president, Time, Weather, 624 C.-Statement received from Keith Bissell, chairman, Tennessee Public Service Commission 635 D.-Annual and monthly reports, complaints and inquiries submitted by Jane 651 E. Additional information submitted by the North American Telecommunications Association..... 704 F.-"Beyond the Bell Breakup," by Peter F. Drucker..... 750 G.-Federal-State Joint Board Recommendations to Federal Communications 775 H.-Additional comments submitted by the Rural Telephone Coalition.. 831 908 947 1038 L.-Touche-Ross & Co. study of bypass in Iowa... 1047 M.-Additional information received from R.M. Hunt, assistant vice president, South Central Bell. 1051 N.-BellSouth estimates of impact of end-user charges on businesses in Bell 1069 IMPACT OF CHANGES IN THE TELECOMMUNICATIONS INDUSTRY ON SMALL BUSINESS (Part 3) TUESDAY, SEPTEMBER 25, 1984 HOUSE OF REPRESENTATIVES, SPECIAL TASK FORCE ON THE IMPACT OF TELEPHONE COSTS, Washington, DC. The task force met, pursuant to notice, at 9 a.m., in room 2359-A, Rayburn House Office Building, Hon. Ron Wyden (chairman of the task force) presiding. OPENING STATEMENT OF CHAIRMAN WYDEN Mr. WYDEN. The task force will come to order. Today we are going to focus on what some have begun to call the bogeyman of telephone pricing: The so-called bypass issue. At issue is whether, with phone rates on the rise, major corporations are going to begin setting up their own phone systems-thereby bypassing the network and reducing the amount of revenue the phone companies will receive. One thing is clear: Bypass exists. A number of major companies, including some in my own State of Oregon, have chosen to set up their own phone systems for at least a portion of their operation. In the days ahead, other companies will undoubtedly do likewise. What is not clear, however, is whether bypass is driven by rising rates or by service needs. Based on the data I have seen to date, as well as my experience with the major employer in my area, I am inclined to believe that companies are more likely to bypass for service reasons than cost. Many also believe it is unlikely that companies will begin bypassing the retwork en masse. After all, setting up one's own phone network is a very expensive proposition, and one which companies will not undertake lightly. Whatever any of the task force members or others might think, it is clear the bypass issue needs further investigation. During the three prior hearings this task force has held here and around the country, his subject has come up again and again. Proponents of access charges for business and residential customers say these charges are needed to allow long-distance rates to be reduced so that companies will not bypass the network. If these companies do bypass, these people argue, phone companies will (1) have to raise the rates for all those still on the network to make up for the loss in revenue. Opponents of the residential/business access charges, however, argue that there is no evidence to support this claim and that access charges will add to the cost burden of those phone customers least able to pay. I look forward to hearing from our witnesses on both sides of the issue. Due to scheduling problems for some of our witnesses, the main bypass panel will be during the afternoon session. In the meantime, however, we will take up some equally important issues relating to the repricing of the telephone system. Among these is measured service, under which phone customers would have to pay for local phone service much the same way they now pay for long-distance service-based on length of call, time of day, et cetera. The particular measured service system proposed recently in my own State of Oregon was opposed by many small businesses, which argued that it would cause their rates to rise astronomically. Other States, however, have measured service plans that witnesses at our hearings have said work well. Today we will hear from an economist as well as from consumer and business groups that have strong feelings about this matter. Also up for discussion today are some of the special problems faced by rural and small telephone companies in the new deregulated environment. Over the past 4 months, the task force has gained a good deal of insights into the impact on small businesses of changes in the telecommunications industry. I expect today's hearing to be equally informative. And at this time I want to recognize my colleagues on the task force, I appreciate their great interest in the subject and recognize them for any comments they would like to make. The gentleman from Louisiana. OPENING STATEMENT OF HON. BUDDY ROEMER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA Mr. ROEMER. Thank you, Mr. Chairman. I want to say briefly how pleased I am to continue being involved in the hearings and how my perspective hopefully will improve on the problem as I learn more about it. I have a feeling that deregulating is like the Lord, it gives and takes away. I have a feeling, as I study it on some critical services like the phone, that it takes away more than it gives. Maybe I am wrong. That is why I am here. Thank you, Mr. Chairman. Mr. WYDEN. The gentleman makes a thoughtful comment, as usual, and I want him to know how much I appreciate him being interested and involved in the issue. The gentleman from Iowa. OPENING STATEMENT OF HON. BERKLEY BEDELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IOWA Mr. BEDELL. Thank you. First I want to commend you, Congressman Wyden, for your leadership in this effort and for the fact that |