6.1% reduction of the toll

NOTES

1STATEMENT OF GENE KIMMELMAN, LEGISLATIVE DIRECTOR, CONSUMER FEDERATION OF AMERICA: REPRICING THE TELEPHONE NETWORK: A THREAT TO UNIVERSAL TELEPHONE SERVICE." SPECIAL TASK FORCE ON ELEPHONES U.S. HOUSE OF REPRESENTATIVES COMMITTEE ON SMALL BUSINESS, SEPTEMBER 25, 1984.

2STATEMENT OF JIM BERNAU, DIRECTOR OF GOVERNMENTAL RELAIIONS, NATIONAL FEDERATION OF INDEPENDENT BUSINESS. SPECIAL TASK FORCE ON TELEPHONES, U. S. HOUSE OF REPRESENTATIVES COMMITTEE ON SMALL BUSINESS, AUGUST 23, 1984.

Mr. WYDEN. Bill Nourse.

TESTIMONY OF ROSWELL W. (BILL) NOURSE, OWNER,
BROOKMEADE HARDWARE & SUPPLY CO.

Mr. NOURSE. I am Bill Nourse, and I own and operate Brookmeade Hardware & Supply Co. in Nashville. I really appreciate your bringing the House Small Business Committee Task Force on Telephones to Nashville, and thank you especially for inviting me. Tennesseans have been fortunate over the years in having exceptional representation in Washington. We have also been blessed by distinguished representation on both the House and Senate Small Business Committees. I am happy to say that the present is no exception to this history. Congressman Jim Cooper of Tennessee is a member of your fine committee and our Senator, Jim Sasser, is an outstanding member of the Senate Small Business Committee. I know that both of these Tennesseans know the value and the wisdom of seeking public comment through the committee hearing process. I emphasize that. I think it is very important that our representative government engages in this process. I am glad to see that you share those sentiments, Mr. Chairman.

We feel fortunate to have you here and welcome you to Tennes

see.

I alluded to the fact that I have had enormous service problems when I moved my business earlier this year. But I think I understand that the phone company has a tremendous problem, the attempt by Government to fix something that wasn't broken, and that is a separate issue.

The reason I am here is because I have been described as a small business political activist. I travel widely and I speak to a lot of small business people across the country, but in addition to speaking to them, I also talk with them and listen to them. This year I had the privilege of traveling with Congressman Berkley Bedell to hearings in Boston, St. Louis, and Denver, pertaining to a small business platform for the Democratic Party. I think the record speaks for itself.

The Democratic Party has the most reflective positions on small business. Small business people understand the complexities of a lot of issues, and they understand that this issue we are going to talk about is very complex. But they also possess a very common characteristic which all of you have seen. They have an inordinate

amount of common sense. They are willing and able, quite able, to see through the rhetoric at times, and I think if you look at what I am about to say from that perspective, you will see why I think in my generalized statement I reflect a vast sentiment that is not always reflected by organizations like NFIB. I mean no criticism to John Sloan and NFIB, but if you take all the organizations in Washington that represent themselves in their description as a small business organization and total their membership and you had no overlap, you have only about a million members.

Your own statistics clearly indicate that there are approximately 14 million businesses in this country that can be classified as small business. So the general sentiment, the general feeling, the perception of what is going on in Government is not always truly reflected by those organizations, and I think in my case I have had the unique opportunity to travel and listen to a lot of those people, so I am going to attempt to cut through some of this misconception for

you.

The small business community in Tennessee indeed welcomes you to Tennessee and feels very pleased that you took the time to come here. The issue we concern ourselves with today is most important, and that is an understatement. It is whether or not small business should be burdened with telephone company access charges for long-distance phone service. In addition to the dollar cost aspect of this issue, there is the equally important, and I am afraid all too familiar, matter of how we as a nation treat the small business sector of our economy. The access charge issue is another in a long list of Government and Government agencies taking small business for granted.

Mr. Chairman, as you know, small business has been burdened in the past and still today with many disproportionate costs. Various studies have shown that small business pays more than its share of utility costs and of many taxes. When hard times are particularly severe, in many cases we are the first denied credit. We are the first to go when the economy turns sour. We are the slowest at times to recover because of our lack of ability to have access to credit. When it comes to paperwork and the redtape that goes with what Government does, we are the last to be considered as to how it affects us, if indeed we are considered at all.

Any one of these problems is enough to put the small firm on the endangered species list. But we are still hanging on and we still contribute greatly to the national economy. We create the majority of new jobs in our economy, and we do the lion's share of innovating. We do these things more efficiently than the big firms with a growing smaller share of the resources.

But in return for these contributions and successes we often receive only apathy from Government policymakers. This access charge issue is no exception. We have a situation where the FCC in an attempt to cover long-distance costs has come up with the idea of imposing flat fees on telephone users.

It is argued by some that these charges are minimal but I must disagree. The national average access charge is $4.89. Here in Tennessee it is $4.85. What is sometimes not made clear but has come out in testimony today is that this is the cost per telephone line not per customer. For example, a small business with four telephone

lines would pay almost $20 a month in additional charges. My business has five incoming lines. I use long distance sparingly, but incoming calls are an integral part of what I do. This is some $235 per year in additional costs. In addition, these costs are likely to go up soon. Though there is now a cap of $6 per line per month, this cap is expected to rise to $7 or even $8 early next year. So it is not really a cap. We are opening the door for an additional charge, an additional transfer of how we pay for something.

Mr. Chairman, this added cost comes on top of recent dramatic increases across the country in the cost of the standard business phone service. The cost of Yellow Pages, directory assistance, private lines, installation, repair, and services are going up across the board. So far the FCC says it is sparing small businesses the access charge by limiting access charges to the users with more than one line, but this does not solve the problem. In addition, the way the FCC has handled this matter leaves a lot to be desired.

I emphasize, not only does it leave a lot to be desired, it is unacceptable from our perspective. First of all, the FCC definition of small business is too narrow, and John Sloan I think testified to that earlier. More than 60 percent of their members have more than two lines and, indeed, I use myself as an example; I have five. My sales are about $1 million a year. I compete across the South against large corporations like General Electric.

If it is accepted that small business is not being dealt with on an equitable basis, then the situation should be remedied, not patched. That is the premise I keep hearing as I travel across the country on a lot of issues. The time for patchwork is over. We need remedial action on a lot of these problems. We need to get back to basics and solve the situation. Also, I have seen no efforts to systematically study the impact of access charges on small business. If I am misinformed on this issue, I would ask to be corrected. I am told that the FCC acted on this matter without a study of the potential impact. I think there was appropriate testimony again today to substantiate my position on that.

The charges had already gone into effect before that public comment was not only sought but even received, and again there is no excuse for this. It is an unacceptable situation. Congress would not accept this in their own matters, and I don't think we ought to accept it from an administrative agency that has this much power. I know in Congress that hearings like this one are held before decisions are made in order to get public reaction. The input is often helpful to the decisionmaking process besides being the right of every citizen. The effort builds public confidence that Government officials are working to make things better, not worse than before. In this case things are worse than they were before this process started.

I have another problem, Mr. Chairman, with the FCC's access charges, and it is the same problem that I have with many flat fees for services. It assumes that everybody uses those services equally, but obviously this is not the case and testimony today has clearly indicated that. It benefits the heavy long distance user and there is no doubt about that. Those who make many long distance calls pay less than their fair share of the costs while those who, in this case many small businesses who make few or no long distance calls, are

really subsidizing the heavy user, and that is what it amounts to, and we need to call a spade a spade.

The discount on the long distance removes the access charge, and we need to understand the shell game that the FCC is playing, and the small business community across this country sees it for what it is. Those that use it get out of paying and get an additional discount. Those that don't, pay, and it is an open-ended process.

The FCC proposed access charges deliberately give the big users a break, in my estimation, and I overemphasized deliberately, the word "deliberately." The FCC felt that this would keep the large user from fleeing the system by what is called bypass, and I think there has been adequate testimony this morning that that is not going to stop it. The FCC is even talking about the fact that bypass is going to go on with or without the access change. They have clearly demonstrated by their own testimony that they expect it to continue and they expect to have to raise more revenue. They have substantiated my point that it is not really a cap, it is only a facade to start a process.

Another reason by the FCC for access charges was that these charges would reflect the true cost of long distance service which, according to the FCC, has subsidized local service for years. Now, first, I would like to say that this local service subsidy has never been substantiated by the FCC. They don't have documentation to prove their own point.

Second, it is somewhat ludicrous to speak in terms of true costs and at the same time impose a false cost in the form of a flat fee access charge on small business. We see the inconsistency in that logic.

Mr. Chairman, I think I have demonstrated today that the access charge is totally unfair to small business and that small business should not be singled out, yet again, to pay for something that someone else is really using. It is not a good idea and in practical application it is failing. If the FCC wants to cover costs, let it do so fairly by calling upon everyone who uses long distance to pay to the degree in which they use the service. I will gladly pay my fair share of the cost of long distance. At least I am paying for what I am using. I am not subsidizing General Electric, a mammoth corporation that I compete against in the area of selling some of my products. I am not afraid of GE, but I am concerned if you tie my hands and give them a break to more effectively compete against the little man or woman.

Therefore, Mr. Chairman, I have two basic simple proposals: That the flat access charge be totally eliminated, and that the cost recovery charges for long distance telephone service should be borne equitably by the users of the service.

Mr. Chairman, I thank you and the committee again for allowing me to testify before you today.

Mr. WYDEN. Thank you for a very fine statement, Mr. Nourse. [Mr. Nourse's prepared statement follows:]

PREPARED STATEMENT OF ROSWELL W. (BILL) NOURSE, OWNER, BROOKMEADE
HARDWARE & SUPPLY CO.

Chairman Wyden, my name is Bill Nourse. I own and operate Brookmeade Hardware & Supply here in Nashville. I appreciate your bringing the House Small Busi