DMA Takes Stand vs. Toll-free Pay-Phone Fees

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Claiming that the new pay-phone compensation rate is too high and that it will increase the cost of consumer products and services, the Direct Marketing Association has petitioned the Federal Communications Commission to reconsider its order.


The 28.4 cents-per-call compensation fee, which went into effect last fall, is paid by 800-number providers to pay-phone operators for calls made to toll-free numbers from pay phones. Calls made from residential phones to 800 numbers are not affected.


The DMA claims the new fee, which is part of the implementation of the Telecommunications Act of 1996, will unfairly hit travel industry and crisis lines as well.


"The new pay-phone compensation rate for subscriber 800 calls will increase dramatically the cost of these calls to toll-free number subscribers," the DMA said in its comments to the FCC. "Ultimately, this will lead to a rise in prices for a host of consumer goods and services."


The DMA's petition, filed in December, has not yet been answered by the FCC. The DMA believes pay-phone service providers should be compensated for calls placed from their pay phones, but at a lower rate.


"In our petition we are asking them to take a look at their rate and see if they can make it more reasonable," said Jerry Cerasale, the senior vice president of the DMA. "We think it should be lower than 28-cents, but we haven't given them a specific number."


The FCC had originally set the compensation fee at 35 cents but lowered it 6.6 cents after the Washington D.C. Circuit Court of Appeals reversed and remanded several parts of the commission's first order, including long-term and interim compensation rates.


The DMA believes the majority of 800-number subscribers are travel-related marketers who receive calls from their customers on the road, as well as business-to-business marketers who check their voice mail or home office via an 800-number from public pay phones. And help lines and crisis lines, which receive a large number of calls from pay phones, would also face a financial backlash, the DMA said.


"Financially precarious 800-number subscribers will be forced to stop offering 800 numbers that can be used from pay telephones," the DMA wrote in its petition. "In the end, it would serve no one to discontinue (or block) a crisis line offering counseling to victims of abuse, to runaways, to the depressed or suicidal, to the hungry or homeless. The compensation rate the commission has established , however, threatens to do just that."


Long distance companies are already raising their service rates to 800-number subscribers and consumers to help deter the cost. Judith Oppenheimer, president of ICB Toll Free Consultancy, said that she has spoken to a number of users who said their phone bills have doubled as a result of the new compensation fee.


"This issue needs to be revisited," she said. "There is a happy medium somewhere and all sides should sit down and try to find it. I think that the pay-phone service providers should be compensated, but they are not providing a good enough service to warrant that price. This is a drastic change for 800 subscribers that does not include the promise of better service."


Jim Hawkins, the president of BellSouth Public Communications, the nation's largest stand-alone pay-phone service provider, said that the long-distance companies have come into multiple windfalls as a result of this, and they are in turn "gouging" the DMA through their "unfairly high rates."


"These are not federal mandates that have to be passed on to the customers," Hawkins said, "but they should be paid by the long distance companies. What really needs to be addressed is the fact that the FCC has put a fair pay-phone compensation rate in place, to be paid by long distance companies. The FCC worked hard to make sure that the thousands of American businesses and agencies who use toll free services would benefit from the continuing wide spread deployment of pay phones, plus increased competition in the pay phone industry.


"Unfortunately," he continued, "some long distance companies have worked hard to exploit pay phone compensation in order to improve unfair multiple rate increases and surcharges on their customers, while unfairly blaming the FCC and the pay phone industry."


AT&T, an 800-number provider, also petitioned the FCC back in December in an attempt to get the compensation fee lowered.


"This fee represents a loss for us as well as our customers," said Mike Cuno, an AT&T spokesperson. "To recover the costs we have unfortunately had to raise some of the prices for our services, such as putting a surcharge on calling card calls and calls made to toll free numbers from pay phones. Our studies show that the cost of making a call to a toll free number only costs between 10 cents and 12 cents."


Cuno stated that 40 percent of the calls AT&T handles are made to toll free numbers, though the amount of calls from pay phones is not known. He said the company recently implemented a feature that allows its 800-number customers to block calls made to them if they feel the operating cost is becoming too great.
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