SD12 - Customer Owned Coin Operated Telephones

  • Published: 1989
  • Author: State Corporation Commission
  • Enabling Authority: Senate Joint Resolution 21 (Regular Session, 1988)

Executive Summary:
Senate Joint Resolution No. 21, adopted by the 1988 General Assembly Session, requested the state corporation Commission (SCC) to study the customer owned coin operated telephone (COCOT) services and charges, and charges for alternate operator service (AOS). AOS is the provision of operator service by companies other than the local telephone company or a certified long distance carrier such as AT&T, MCI, or US Sprint. AOS service is usually provided in hotels, motels, airports, or in conjunction with COCOT service where users are "transient" and are unaware of the AOS company's rates or identification. Neither industry is regulated by the SCC.

The 1985 Session of the General Assembly added Virginia Code Section 56-241.2, which relates to approval of rates for the resale of telephone service. This legislation provided for coin service not furnished by a certified telephone company to be based on number of calls.

This action by the General Assembly led to the SCC development of guidelines (Attachment 1) for telephone companies' use in filing appropriate terms, conditions, and rates for the connection of COCOTs to the public network. Most local telephone companies in Virginia have now filed COCOT tariffs which comply with SCC guidelines.

Most AOS companies are resellers of WATS or other bulk rated services furnished by facility based companies such as those mentioned above. The SCC ruled earlier that resellers are not monopolies and therefore should not be regulated.

The SCC has issued a press release informing the public about AOS rates, ordered C&P Telephone Company to send a bill insert with the same information, and ordered that local service cannot be disconnected for withholding payment of a noncertified company's toll charges. (AOS companies are not certified in Virginia.)

The study of COCOT and AOS services pursuant to SJR No. 21 revealed the following:

1. In a field inspection of 161 randomly selected COCOTs, which represents approximately 5% of the total, 28% of the sets were in full compliance with telephone company tariffs. The remaining sets (72%) exhibited one or more tariff violations, were out-of-order, or had been disconnected. The SCC feels that the results of this sample are representative of total tariff compliance figures.

2. The charges for all AOS-handled test calls, placed from COCOTs at various locations to the SCC's Division of Communications, were substantially higher than AT&T's or C&P Telephone Company's long distance rates as shown on Attachment 2.

Conclusions

Based on the results of this study and on customer complaints, the SCC believes that problems exist in both the COCOT and AOS industries and that action must be taken. While the General Assembly could amend Code section 56-265.1 to allow the SCC to register or certify these industries, other approaches appear to be more appropriate at this time. Code section 56-265.1 defines a "public utility", as it relates to the furnishing of telephone service, as ". . . any company which owns or operates facilities within the Commonwealth of Virginia . . .". Neither COCOT providers nor AOS companies own or operate facilities as contemplated by this definition. COCOT providers own only the coin telephone set itself which is an easily connected piece of terminal equipment. The AOS companies usually own equipment similar to a telephone utility's central office switch, but to the SCC's knowledge none are presently located in Virginia. The AOS companies transmit interstate and intrastate long distance calls via leased lines owned and operated by the certified local and long distance carriers. It follows that both COCOT and AOS companies can enter and exit markets easily with relatively small capital investments.

Progress has been made in bringing COCOT providers into compliance with the telephone companies' tariffs. The SCC can place renewed and even greater emphasis on tariff compliance. Such action may result in substantially correcting this problem. This action is preferable to the certification of perhaps hundreds of COCOT providers who, in many cases, own only one public telephone set. States which require certification report that the process is very time-consuming, expensive, and cumbersome. Additionally, the Code could be amended to specifically authorize the SCC to impose sanctions in the form of a monetary penalty on those COCOT owners who do not comply with the local exchange company's tariff provisions regarding COCOTs.

AOS presents peculiar problems because of the interstate nature of their business. The providers are all located outside Virginia, but their clients, the "traffic aggregators", such as COCOTs, hotels, motels, hospitals, airports, and college campuses, have locations in the Commonwealth. Thus, an out-of-state AOS company only handles a Virginia intrastate call when a transient guest at one of the institutions places a call to another Virginia location. Any measure that would limit or forbid such intrastate calling would still not protect Virginians from interstate abuses by AOS companies. Customer notification and awareness is the most important issue at this time. If a customer is alerted to check local and long distance rates before placing a call from a public location, both intrastate and interstate overcharges can be avoided. Additional problems are presented, however, when the long distance carrier of the caller's choice cannot be accessed from a public phone.

Legislation requiring public notice similar to that shown on Attachment 3, requiring businesses, such as COCOT providers, motels, hotels, hospitals, airports, and universities, to post a notice on or near each telephone instrument naming the provider of the long distance services and whether a different carrier can be accessed from that phone may alleviate the problem. So notified, customers can make intelligent choices regarding the call, i.e., it could be delayed or placed from another location. Failure to provide adequate information is a traditional deceptive trade practice and warrants criminal as well as potential civil liability.