Leahy To Offer Bill Targeting Telcos’ Pay Phone Windfalls

March 30, 1998

Sen. Patrick Leahy, D-Vt., later this week will introduce a bill targeting windfalls collected by pay phone firms whose telephones do not offer change to their customers.

Public phones rarely, if ever, offer change, and there are 2,100,000 pay phones nationwide, gathering millions of dollars each month for the industry in unearned windfalls. The problem has worsened since the Federal Communications Commission’s recent deregulation of pay phone charges, when many firms promptly raised their rates -- typically, from a quarter to 35 cents -- without offering change to customers stuck with the wrong coins. The U.S. Supreme Court today (March 30) let stand a court decision upholding that FCC preemption of states’ authority to influence public phone rates.

Following is a summary of "The Consumer Pay Phone Protection Act of 1998," sponsored by Leahy:

CASH CHANGE OR CREDIT TO STATES: The bill requires that pay phone companies which charge more than 25 cents for local phone calls provide either cash change or other alternatives to consumers, or credits to states equal to the value of the unpaid change, for use by states for telecommunications activities that promote the public interest, such as safety, health, emergency services, education, or in nursing homes.

PROMOTING THE PUBLIC INTEREST: The bill directs that these sums not provided to consumers be conveyed to the states where the pay phones are located. Such funds would go to support public interest pay phones in remote locations where they might be needed for emergency calls, in underserved areas, or in areas where they would promote public safety. The funds could be used to improve phone access in poorly served areas.

ONE-YEAR IMPLEMENTATION: The bill directs the FCC, within one year of the bill’s enactment, to issue proposed rules that apply to pay phone providers that charge more than 25 cents for local pay phone calls. Companies would have to provide for cash change or automatically credit the appropriate public service agency in the respective states to account for instances in which change is not provided at the pay phone.

NO INCREASES IN CHARGES OR DECREASE IN SERVICE: The bill requires that the FCC ensure that pay phone providers do not pass any costs of compliance with this bill on to consumers and that pay phone providers in no way reduce or limit service based on this anti-windfall requirement.

CONSUMER NOTICE: The bill requires that small stickers or other notice be posted on pay phones for the purpose of advising consumers when cash change will not be provided.

RECONSIDER RULES: The bill directs the FCC to reconsider its rules under which the FCC removed authority from states to regulate the charge for local calls made over pay phones. The FCC would reexamine the need for states to have greater decision making roles where local competition between pay phone providers is not present.