Public Utility Commissions and Sustainable Funding for Community Technology

by Ellis Jacobs

While attention has been focused on legislative developments in Washington, much of the future of telecommunications and how that future will impact low income people is being worked out right now in proceedings in front of state public utility commissions.

Those proceedings, which involve existing phone companies seeking to change the way they have historically been regulated and new competitors submitting to state regulation for the first time, provide an opportunity for low income advocates to address both lack of access to basic phone service and lack of access to computer and telecommunications technology and related educational opportunities.[1]

The Problem

Lack of a telephone is common problem for American low income families.

While 94% of all American households have a phone, 31% of all families receiving food stamps have no telephone and 43.5 of households completely dependant on public assistance lack telephones.[2] African American and Hispanic households are more than three times as likely as white households to not have phones.[3] In households headed by women in any of these categories, the likelihood of not having a telephone is even greater.[4]

Not having a telephone poses significant problems. It creates a barrier to getting timely medical attention and makes it difficult to report other emergencies such as fire or crime. One study has shown that the inability to contact agencies by phone is one important factor in keeping people from getting benefits for which they qualified. It is a barrier to employment: jobs are frequently offered and accepted via telephone.[5]

It has a serious impact on the ability of a household to keep gas and electric service. Lack of phone service makes it more difficult for a household to enter into utility payment plans, make contact with social service agencies and otherwise respond to an impending shut-off. One study conducted by the National Consumer Law Center for the Maine Public Utilities Commission showed that 80% of disconnected households had no telephone and that people without a phone were under-represented in utility payment plans.

Today phone lines are used for far more than just voice communications. Phone lines make possible data transmission, computer networking and the use of the developing "information superhighway."

Many jobs in the future will call for people who are well educated in the use of telecommunications and computer technology. Already a working person who is able to use a computer earns 10-15% more than someone in a similar job who cannot.[6] Computer networks offer their users access to communities of people who share interests, make possible communication around the globe and already provide access to much of the world's information resources. Public data is becoming available on line and the expectation of access has taken root. Those with access have a distinct and growing advantage. Those without access will fall behind.

Obviously, the many low income families without phones are missing out on these developments but the problem extends to those with phones as well.

According to 1993 census data the wealthier the family, the more likely it is to own a computer. 74% of families making over $75,000 own at least one. By contrast only 15% of families with incomes under $20,000 own a computer. The census revealed a racial disparity as well. White families are three times as likely as African American or hispanic families to have a computer.

As computer networking becomes more prevalent, the division of society into information haves and have nots looms very large.

An Opportunity - The Ohio Ameritech Case

During much of 1993 and 1994, the Legal Aid Society of Dayton and Cleveland, Ohio represented clients in a case in front of the Public Utilities Commission of Ohio (PUCO). That case provided the opportunity to address many of these issues. The result of that case includes some important steps forward for low income communities and points to opportunities for low income advocates.

On March 23, 1993, Ameritech Ohio (The Ohio Bell Telephone Company) began the process of seeking alternative regulation from the PUCO. On April 6, 1993 the Office of Consumers' Counsel, the statutory legal representative of Ameritech Ohio's residential customers, filed a complaint against Ameritech alleging that their current rates were unjust and unreasonable and should be reduced to a just and reasonable level. By entry dated September 2, 1993, the PUCO consolidated the two cases for purposes of hearing.

Twenty-five parties filed for and were granted intervention in both of these cases. The intervenors included long distance carriers, cable operators, other telecommunication providers and a variety of entities representing consumer interest. The consumer parties included the American Association of Retired Persons, the Greater Cleveland Welfare Rights Organization, the Edgemont Neighborhood Coalition of Dayton, the Cities of Cleveland, Columbus, and Toledo, and the Ohio Departments of Education and of Administrative Services. These groups coalesced during the course of the case into the "Consumers' Coalition."

Ameritech's application for alternative regulation was part of the company's effort to change the way it was regulated in the State of Ohio. Previously Ameritech, like most utilities, was subject to "rate of return" regulation. The rate of return regulation examines the cost of providing service, the amount of investment, the fair rate of return in comparative settings, and sets rates based upon those factors. Ameritech was seeking the alternative of "price cap" regulation which commits the company to providing services at certain set rates but eliminates all regulation of the amount of profit the company is making. Ameritech, along with just about every other player in the telecommunications field, wanted to enter new areas of service provision and claimed that Alternative Regulation was a prerequisite to being able to do that.

The Ameritech case took place within an evolving regulatory context which provides that the PUCO can grant Alternative Regulation where it finds that it would be "in the public interest."[7]

In rules adopted by the PUCO in 1993 an applicant for Alternative Regulation is required to show that the proposed plan is in the public interest. They need to show, among other things, "how the plan might impact the goal of universal service..." Each Alternative Regulation proposal must also include "commitments," expenditures beyond what is needed to meet minimum service standards. The company must demonstrate how those commitments are consistent with the policy goals of the Ohio Revised Codes.[8]

Ameritech's application included a number of commitments to make general infrastructure improvements and it including a commitment to create a broad band interactive network connecting Ohio's schools. The company widely promoted this educational commitment as their primary way of trying to win public support for their proposal.

On March 25, 1994 the staff of the PUCO filed its staff report of investigation which concluded that indeed the company had been overcharging its customers and the "commitments" made by Ameritech in its Alternative Regulation application were not sufficient to justify the regulatory relief Ameritech was seeking. Staff reports are not dispositive of any issues but do provide a look at where the Commission might end up with a case.

It was in this context that almost three months of evidentiary hearings on the consolidated case commenced on June 22, 1994. Through the cross examination of Ameritech's witnesses and through presenting their own witnesses, the Consumer Coalition developed a record showing, among other things, that Ameritech had been overcharging its customers, that the company's education commitments were hollow and somewhat illusory, and that the existing low income telephone program was ineffective leaving a great many low income Ohioans without phones.

Ameritech had claimed that its educational network would lessen the inequality between wealthy and poor school districts. The evidence at hearing showed that the equipment each school would have to provide to connect to the network would cost between $35,000 and $50,000 per classroom. There was testimony that because of these cost barriers it was likely that only wealthy school districts would take advantage of this new technology. The effect would be to increase rather than decrease the disparity in educational opportunity between wealthy and poor school districts.

In addition, cross examination established that, where students did have access to computers and networks at school, those students who also had access to similar technology at home would derive far more benefit than students who didn't have after school access.

Further, an expert witness sponsored by low income advocates, Nancy Brockway from the National Consumer Law Center[9], also testified that access to and knowledge about computer networks was becoming more and more important to participation in the economic and political life of the country and that low income communities had virtually no access to those networks. Without some affirmative corrective action, she testified, it was likely that the proliferation of this technology would reinforce and exacerbate existing economic and racial inequality.

With regard to basic phone access the evidence showed that service for low income people was far from "universal" and that the existing low income telephone programs with their very limited eligibility and benefits were not helping to correct the problem in any meaningful way.

The Agreement

While the evidentiary hearings were going on, Ameritech and the Consumer Coalition began to negotiate in earnest. The Consumer Coalition was able to fashion a joint negotiating position and strategy. The Edgemont Neighborhood Coalition pressed for community computer centers and the education technology fund. Other Coalition members pushed other issues. The Consumer Coalition's position included funds for low-income community computer centers as well as the school technology fund, general rate reductions for all residential customers, and the establishment of a Universal Service Assistant (USA) program which would allow low income people to get reduced rate phone service without having to pay a deposit and connection charge. The Consumer Coalition stayed together throughout the negotiations and continued to support these positions, all of which ended up in the final agreement with Ameritech. The staff of the PUCO also joined the negotiations and ended up signing the agreement.

Another Step Towards Universal Telephone Service

The Universal Service Assistance program has broad eligibility. Recipients of HEAP, Ohio Energy Credits, AFDC, SSI (Blind, Disabled & Aged) General Assistance, Disability Assistance, and/or Medicaid will be eligible for USA. Approximately 100,000 households which do not presently have a telephone will receive new benefits.

Benefits include a $8 per month discount from standard prices with free touch tone so that monthly rates will be reduced (flat rate to $10.87; minute line to $2.32). Non-flat rate customers will be capped at the flat rate for the first six months and be able to switch to flat rate at anytime for free. No deposit is required. No service connection is charged. Free toll restriction and 900 & 976 blocking are available if requested. The company must enter into arrearage payment arrangements with those who have been or who are in danger of being disconnected.

Internet and Technology Access

Low income high technology needs are addressed in two ways.

The settlement provides for 14 Community Computer Centers to be created in seven Ohio cities in the Ameritech service territory: Cleveland, Columbus, Dayton, Toledo, Akron, Youngstown, and Marietta. Each center will receive $150,000 over three years for staff and equipment. The total expenditure on centers will be $2.2 million.

Community Computer Centers are designed to make computer technology and networks available in low income neighborhoods. The centers will generally be located in storefronts. They will bring together hardware, software and network access in a tutorial, workshop, and drop-in atmosphere; they will be staffed by experts and volunteers in community outreach and computer technology; they will be open in the evening.

In this respect the result of this Ameritech Alternative Regulation case is precedent setting. This is the first time that Community Computer Centers have been included in the settlement of a case in front of a state public utility commission.

An 18 million dollar school technology fund was also established, to be administered by the State Department of Education. Low income school districts are given a preference in accessing these funds which can be used to purchase "consumer premises equipment" for use with computer and distance learning networks.


It was a combination of factors which made the settlement possible:
  1. the leverage which came from a case showing excess profit by Ameritech and a PUCO staff report which supported that position and which alleged that the company's commitments were insufficient,
  2. state regulations which use "the public interest" and "universal service" as touchstones,
  3. an evidentiary record which supported the need for computer centers and an education fund in order for alternative regulation to be in the public interest and which supported further efforts at overcoming affordability barriers to having a phone,
  4. a developing competitive environment where Ameritech and several other large companies were competing for pieces of an expanding telecommunications pie,
  5. a low income position that had a realistic price tag and,
  6. a consumer coalition which included low income interests, attempted to address the needs of all its members, and stuck together in negotiating with the Company.

On November 23, 1994 the PUCO approved the settlement because the parties represented a broad spectrum of interests, because the concerns of its staff were satisfied in the agreement, and because the record developed in the hearing supported the settlement terms.

Throughout the country other "baby bells" will be seeking regulatory relief from public utility commissions. Each such case will present the opportunity to raise many of the issues raised in the Ameritech Ohio case. In addition, cable and long distance companies want to begin providing local phone service in competition with the existing phone companies. These would-be competitors will be seeking the blessing of state regulators and there will be opportunities to further low income interests in those proceedings as well.


  1. All but five states allow telephone companies to seek alternative forms of regulation. In 34 states, at least one company is already operating under alternative regulation. In 11 states, all telephone companies are already covered. Bauer, K. 1994. NARUC Report on the Status of Competition in Intrastate Telecommunications, National Association of Regulatory Utility Commissioners, Sept. 23, 1994. The September 1995 update is available for $45.00 plus $4.50 postage and handling from NARUC, 1102 Interstate Commerce Commission Building, P.B. Box 684, Washington DC 20044-0684, 202/898-2000.
  2. Belinfante, A. 1989. Telephone penetration and household family characteristics. FCC No. CC Docket No. 87-339 Washington, D.C.
  3. Belinfante, 1991. Monitoring report: Telephone penetration and household family characteristics. Federal Communications Commission No. CC Docket No. 80-286. Washington, D.C.
  4. Belinfante 1989.
  5. In Butte Community Union v. Lewis, 745 P.2d 1128, 1131 (Mont. 1987), the Court found that lack of telephone service was a significant barrier to employment.
  6. Newsweek, February 22, 1995, p. 50, quoting Alan Kruger, chief economist for the U.S. Labor Dept.
  7. Ohio Rev. Code 4927.04. In 1989 the State of Ohio adopted a new chapter of the Ohio Revised Code which provided for Alternative Regulation of telecommunications companies under certain circumstances. That chapter established that it was the telecommunications policy of the state to: 1) ensure the availability of adequate basic local exchange service to citizens throughout the state; 2) maintain just and reasonable rates, rentals, tolls and charges for public telecommunications service; 3) encourage innovation in the telecommunications industry; 4) promote diversity and options in the supply of public telecommunications services and equipment throughout this state; and 5) recognize the continuing emergence of a competitive telecommunications environment through flexible regulatory treatment of public telecommunications services where appropriate.
  8. Rules for Alternative Regulation of Large Local Exchange Companies, Case No. 92-1149-TP-COI (March 10, 1993). "Universal Service" isn't just an Ohio policy. The Communication Act of 1934, which created the Federal Communication Commission, proclaimed that the goal of telecommunication regulation was: " . . . to make available, so far as possible, to all the people of the United States, a rapid, efficient, nationwide and worldwide. . . communication service with adequate facilities at reasonable charges. . . for the purpose of promoting safety of life and property through the use of . . . communications." 47 U.S.C. Section 151.
  9. Nancy Brockway can be reached at the National Consumer Law Center, 18 Tremont St., Boston, MA 02108, 617/523-8010,

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