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we are having these hearings. Certainly it is extremely important that we get things out to the public so the people know what the problem is.
It appears to me that divestiture has accelerated a number of trends that impact small telephone companies: An increasing paperwork burden, equal access requirements, and depreciation schedules. My concern is that the combination of these pressures may make it very difficult for small telephone companies to keep up with regulatory and technological changes taking place in the industry.
I am also concerned about the impact that the local measured service [LMS] rate structure proposals will have on the elderly, low income, and handicapped persons, as well as the social service agencies which help these groups.
The impact of the access charge decision is expected to be especially hard on rural telephone users, both residential and small business. I fear that most rural small businesses will not feel any benefit from the access charge, and in fact will have to make up for the additional charge by passing along the cost to rural consumers. The FCC's decision to fix telephone company depreciation schedules will further escalate local telephone rates, making basic telephone service a heavy financial burden for rural areas.
Also, I have yet to be convinced that the access charge will indeed discourage bypass.
These are all areas of great concern to me, and I hope that in the hearing today we can address these issues which have such serious implications for large segments of this country's population.
I thank you, Mr. Chairman.
Mr. WYDEN. I thank the gentleman for an excellent statement. He has been a very strong advocate of small business during his tenure in the Congress, and I am particularly pleased that there is someone on the panel who wants to focus on the needs of rural phone users and rural small telephone companies. I want to just say I appreciate the gentleman's participation as well.
Congressman Roth who is also on the committee could not be here today, but we will insert into the record at this point his opening remarks. Likewise, we will insert one by Congressmen Bilirakis and Weber who could not attend.
[Congressmen Roth, Bilirakis, and Weber's opening statements with attachments follow:]
OPENING STATEMENT OF HON. TOBY ROTH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN
Mr. Chairman, I would like to submit for the review of the task force information from a fact finding forum that I held in Green Bay, WI, on Friday, September 14. This forum discussed the impact that telephone access charges are having on small business.
Congressman Vin Weber and I heard valuable testimony from small businessmen from throughout northeast Wisconsin, their organization representatives, the major telephone companies in the State and the Wisconsin Public Service Commission. There was a large turnout and we can all conclude from that, that this is a very important issue in the Midwest and I suspect, throughout the Nation.
The written testimony and a summary of the oral testimony that I will be submitting clearly points to an important conclusion; further review of access charges is necessary. Small business is adversely affected by their implementation and there is a fear as to where they will ultimately lead. We need to investigate this problem
thoroughly and act swiftly to prevent undue hardship for small business. It is necessary to act, not simply react, to the growing challenges that the divestiture of AT&T are presenting us.
I found it extremely helpful to hold a hearing in the Midwest. Clearly this is an issue which is of deep concern to business in America's heartland.
On Friday, September 14, 1984, Congressman Toby Roth conducted a fact finding forum in Green Bay, Wisconsin on the impact telephone access charges are having on small businesses in northeast Wisconsin. Congressman Roth delivered opening remarks stating his concern over the effects of access charges.
Accepting testimony with Congressman Roth was The Honorable Vin Weber, Member of Congress from Minnesota's Second Congressional District. Mr. Weber noted that there was a great deal of confusion in Congress on this issue. He stated his satisfaction that this issue had been brought to a rural, upper Midwestern area to get local views on this national subject.
This panel consisted of representatives of phone companies serving Wisconsin. Mr. Ray Riordan, Executive Vice President of the Wisconsin State Telephone Association, an organization representing Wisconsin's independent, local carriers, declared the term "access charge" to be a misnomer. He explained the necessity of the access charge to recoup nontraffic sensitive costs.
This opinion was shared by Mr. Dan Griffith, Assistant Vice President of Wisconsin Bell, local carrier for two-thirds of Wisconsin's telephone business. Mr. Griffith declared Wisconsin Bell's commitment to universal service and stated that the access charge must be looked on as a recomputation (where some will pay more and others will pay less), not an increase, in telephone costs.
Mr. Lynn Meyer, Assistant Vice President of Wisconsin AT&T Long Distance, informed the audience that his company welcomed competition. However, he shared his concern for bypass operations that he says are practiced by 40 to 50 companies in Wisconsin. He also stated that AT&T pays its own access charge to the local carrier.
This panel consisted of a number of small business representatives from northeast Wisconsin, who spoke from the floor sharing their concerns and questions. Highlights from this testimony includes: Mr. Fritz Jaeger of Aerial Company of Marinette, complained that his phone bill was up 20 percent and wanted to know where that money was going; Mr. John Herner of Appleton understood the need for funding to replace the internal company subsidy, but questioned the use of access charges; Mr. Roland Murphy, of Roland Murphy Construction of Green Bay, viewed the breakup of AT&T as the root cause of the problem and also questioned the phone company's efficiency in disposing of capital equipment; Mr. Hugh Begy of Appleton spoke on complications which have arisen concerning computer access through phone lines since the charge was instituted.
Further highlights include: Mr. Mike Sullivan of Spring-Green Lawn Care of De Pere believed he was being charged more than his fair share. He was also of the opinion that new technology should be lowering, not raising, his phone bill. Mr. Lewis Konop, of Konop Vending Machines, Green Bay, emphasized the confusion that currently surrounds each phone bill. Few even know what part of each bill is for access charges. He also spoke on the necessity of the telephone for the small businessman. As a single line telephone customer, Mr. Marvin Roth, owner of Dave's Burger Shanty in Menasha, spoke of his concern that the present access charges are only the tip of the iceberg.
The turnout of these and other local businessmen and women with similar concerns clearly points to the conclusion that the small business person is clearly affected by these charges.
Due to a change in schedule, Mr. Nes Flores, Chairman of the Wisconsin Public Service Commission, was called upon to make his statement prior to the business organization representatives. Mr. Flores commented on Wisconsin's commitment to the small businessman. He also declared that farmers would be affected by the breakup of AT&T. He stated his opposition to flat rate end user fee. He informed
the audience that the Wisconsin Public Service Commission had appealed the Federal Communications Commission access charge to the Supreme Court. He also described the Wisconsin intrastate plan which includes no end user charges. He also dealt with the changing method of depreciation, stating that the FCC had made it easier to recover these costs.
The final panel included two representatives from Wisconsin business organizations. Ms. Georgia Thomas, Vice President of Cardinal Express Corporation in Racine, is Secretary of the Wisconsin Women Entrepreneurs. Ms. Thomas stated that it was obvious that costs have steadily gone up since 1981 and although the initial monthly access charges are small, they will undoubtedly steadily increase. Another concern which she shared was that the majority of small businesses are calling long distance within Wisconsin rather than interstate.
Mr. Bill Smith, Director of Government Relations for the Wisconsin chapter of the National Federation of Independent Business, stated his belief that access charges have a severe negative impact. Telephone costs were ranked number 6 by Wisconsin NFIB members in terms of priority out of a possible 72 small business problems. Over 60 percent of small businesses have more than one phone line. Nearly two-thirds of the members reported that less than half of their phone bills were long-distance charges. He emphasized the need to rescind access charges so that they can be studied more completely.
In concluding, Congressman Roth and Weber asked a number of questions of the witnesses and stated their intention to share what was learned at the forum with their colleagues on the Telephone Task Force in Washington.
OPENING STATEMENT OF HON. MICHAEL BILIRAKIS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA
Mr. Chairman, I have received from Mr. Ronald Clark, Vice President of the Time, Weather, Temperature Advertising Company in Tampa, an outline of how access charges will affect this innovative new small business, which provides a public service.
Mr. Clark's company has responded to a need created by divestiture and at the same time created an innovative advertising medium. However, this small business will be adversely affected by access charges.
Mr. Clark's comments are worthy of the attention of the members of this task force and I request that his correspondence be included in toto in the hearing record.
OPENING STATEMENT OF HON. VIN WEBER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA
I appreciate again the opportunity to hear the concerns voiced about the effect access charges will have on small business. Like earlier hearings, I want to focus my attention on the particular needs of rural small business in a deregulated telecommunications industry.
I continue to hear from small businesspeople in Minnesota that Congress should address the whole telecommunications issue fairly. Some are afraid that rural small business will be left out of the decision-making process when members of the House and Senate legislate this issue. I don't want to see that happen.
I want to thank Task Force Chairman Ron Wyden and other members for the opportunity to address the concerns of small business on this most important issue.
Mr. WYDEN [continuing]. We have a very interesting set of witnesses this morning and a long schedule, so we will begin with panel 1, Hon. Frank S. Swain, Chief Counsel for Advocacy, Small Business Administration.
Mr. Swain, we are very happy to have you. Let me say, we will make this the rule of the day, we will make any prepared remarks you have a part of the record, and if you would, because the schedule really is very long and we want to finish up before breakfast tomorrow, if you could just highlight some of the principal con
cerns you have, and we will make your prepared statement a part of the record.
TESTIMONY OF FRANK S. SWAIN, CHIEF COUNSEL FOR
Mr. SWAIN. Thank you very much, Mr. Chairman, and my congratulations to you and the members of the task force for your interest in this critical issue, and allow me to say as an aside that I believe that this is one of the most useful ways that the Small Business Committee functions. Many people say to me, "Well, the Small Business Committee just legislates on the SBA."
I think it absolutely critical that the Small Business Committee use the opportunity it has for hearings to shed light on some critical issues, critical issues that are many times ultimately determined in many forums, many other forums, but when they are determined, sometimes there is no particular thought given either before or during or after the decisions are made to the impacts that these decisions have on small businesses. And so I think that it is absolutely essential that the task force has been digging into the issue the way that it has, and we look forward to continuing to work with the task force.
As you suggested, I will attempt to summarize my statement, it is fairly brief, and I will go through it quickly.
Like everyone else, small businesses are trying to adjust to and understand the restructuring of the telecommunications industry brought on by the divestiture of AT&T. The Office of Advocacy has been very active in the debate that has centered around the AT&T divestiture and the pricing of telephone services.
We have consistently stated that the divestiture of AT&T is something that is not only good for the consumers of telephone services, both business and residential, but it is also good in terms of future business opportunities for small firms in or entering the telecommunications industry. During this present transition period from subsidized to cost-based pricing, we must not forget that the goal of divestiture is to bring about a closer balance between cost increases and decreases so that dramatic increases in phone service costs could be avoided and universal service preserved.
Thus, access charges, which are only one of many factors in the restructuring formula, should in the future be counterbalanced by decreases in interstate long-distance toll charges. Some small businesses, especially those that are heavy users of long-distance service, will eventually see decreases in their overall phone service expense.
Therefore, it is incumbent upon this task force, the Federal Communications Commission, State public utility commissions and others active in the restructuring effort to monitor the Bell Operating Co's., AT&T, and other long-distance services to see that savings realized as a result of cost-based pricing are passed on as they become available. Divestiture should under no circumstances be misused to extract unjustified or excessive fees from small business end users.
In other words, I think that the divestiture should basically result in revenue neutral effects. If access charges are increased a
little bit here or there, then there should be other savings passed on, and I think that FCC and all the other players have to bear in mind that they have to keep everything in counterbalance, that changes that have been made by the court cannot be used as an excuse just to increase everything without some counterbalancing decreases.
The impact of divestiture has been felt at many levels. Of course, the committee has much testimony on this specifically. But in addition to that, a number of State public utility commissions have also instituted intrastate access charges at this time, and most of the States must also resolve requests from the Bell operating companies for rate increases.
In addition, small businesses have to cope with higher charges for directory assistance, private lines, installation, repair and service options.
Thus, it becomes clear that the FCC interstate access fee decision is only one of at least three factors that will result in significant phone service charge increases. Increases in the form of intrastate access fees and higher priced service options clearly have the potential for exceeding total interstate access charges.
In other words, if people are concerned about the extra $2 per month or $6 per month that they may have to pay as a result of the access fee proceeding, I think they will really be very mad when they see the applications that have been made to some of the State PUC's for rate increases involving other segments of phone service.
The key issue is to balance the increased charges with positive aspects to the AT&T divestiture. Divestiture has already resulted in lower priced long distance and equipment options for small business and has brought new opportunities for small interconnect companies, equipment suppliers, and long-distance resale suppliers. As the new telecommunications industry matures, additional opportunities for smaller concerns should become available.
The Office of Advocacy has been a participant in most of the proceedings since April 1982, relating to the restructuring debate, when we filed a brief with the court. Our participation has been intended to reflect the interests of small business by assuring that this important segment of our economy assumes no more than its fair share of the responsibility for supporting our new, deregulated and cost-based telecommunications industry.
The purpose of the Federal Communications Commission's access charge decision was to end the long-distance subsidy of local plant costs. The Commission's plan, which exempts single-line businesses and residential users from the fees at this time is viewed as unfair by many small business owners and, moreover, represents an abandonment of the cost-based pricing principle. Cost-based pricing in this instance will operate successfully only when all users of the local network meet their support obligations in a fair and equitable
Exempting large segments of users, such as all residential consumers, from sharing these obligations places an unfair burden on the Nation's small businesses and the others left to assume the financial responsibility for maintaining the Nation's telecommunications network. Or, putting it another way, if I have a business in