INFORMATION ON TELEPHONE ACCESS CHARGE LEGISLATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90B01370R000300370023-4
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 5
• Document Creation Date: December 21, 2016
• Document Release Date: December 4, 2008
• Sequence Number: 23
• Publication Date: January 9, 1984
• Content Type: FORM

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i,a Pei try
M-A
057
CABINET AFFAIRS STAFFING MEMORANDUIV `..,
Date: 1/9/84 Number: CA ID #168880
Subject: Information
on Telephone Access Char.
Ana H. R- 4102)
ALL CABINET MEMBERS
Vice President
State
Treasury
Defense-
Attorney General
Interior
Agriculture
Commerce
Labor
HHS
HUD
Transportation
Energy
Education
Counsellor
OMB
CIA)
UN
USTR
GSA
EPA
OPM
VA
SBA
CEA
CEQ.
OSTP
FCC
Due By:
Tegj al ion
Baker
Deaver
Clark
Darman (For WH Staffing)
Jenkins
Svahn
McManus. Michael
.................................................................
CCCT/Gunn ^
CCEA/Porter ^
CCFA/ ^
CCHR/Simmons ^
CCLP/Uhlmann C
CCMA/Bledsoe ^
CCNRE/ ^
REMARKS:
Attached, for your information, is the guidance developed by OMB
on legislation (S. 1660 and H.R. 4102) pending in Congress which
opposes the FCC Access Charge decision.
RETURN TO: ^ Craig L. Fuller ^ Katherine Anderson ^ Don Clarey
Assistant to the President ^ Tom Gibson ? Larry Herbolsheimer
for Cabinet Affairs Associate Director
456--2823 Office of Cabinet Affairs
456-2800
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TELEPHONE ACCESS CHARGE LEGISLATION
S. 1660 AND H.R. 4102
I. S. 1660 (Packwood) is 'a slightly less damaging, but still unaccepable counterpart to
H.R. 4102 (Wirth), which passed the House over strong Administration opposition.
The Packwood bill would:
A. Prohibit FCC from imposing a flat monthly "end user access charge" on residential
users and business users with only one phone line until 1986.
B. Establish a new "Universal Service Fund" paid for by long distance callers to
provide new subsidies' to (1) local phone companies with higher than average costs
(primarily in rural areas) and (2) subsidized "lifeline" telephone rates for low
income persons.
C. Impose a new tax on telecommunications systems that bypass the local telephone
company.
II. No access charge bill passed by the Senate could be "safe", because the"worst
features of the Wirth bill could be re Inserted in Conference Committee. .
A. The telecommunications industry is undergoing technological and regulatory changes
at an unprecedented rate.
B. Any new legislation would prolong the current regulatory uncertainty and impose new
costs on the industry of adapting to a new regulatory regime.
III. No access charge legislation is necessary.
A. FCC is phasing out almassive subsidy of local telephone companies by long distance
callers.
1. At present, interstate long distance callers pay a share of local telephone
companies' fixed costs (non-traffic-sensitive or NTS costs) equal to 3.3 timed.
their share of usage. For example, if 15% of the minutes of calling are
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interstate long distance, then 50% of local NTS costs are recovered from long
distance rates.
2. FCC's access charge plan, to take effect April 3, will reduce this unfair cross
subsidy by recovering part of local phone companies' NTS costs from a new flat
monthly charge on telephone lines (end user charge) rather than long distance
rates. The end user charge will be $2 monthly for residential phone lines in
1984, and up to $6 monthly for business phone lines.
B. FCC's access charge plan will not lead to unreasonable rate increases.
1. Local telephone companies' recent rate increase requests will raise the amount
they collect from ratepayers less than 8%. This is because 20% of the. increase
requests are merely accounting changes, and State regulators will probably grant
less than 50% of the remainder. State regulators have historically held the
line on local residential rate increases.
2. The new end user charge will be offset by lower long distance rates. AT&T will
reduce long distance rates more than 10%, and MCI has announced that it will
reduce its rates also, if the FCC plan takes effect.
3. FCC has already agreed to a new subsidy for lifeline telephone service for low
income persons. FCC -will waive the $2 monthly charge for any subscriber to a
State-approved lifeline service.
4. The plan developed b FCC's Feceral State Joint Board will protect high cost
local phone companies. It provides a high cost factor" subsidy that will
prevent any local phone company from having to pay more than 156% of national
average non-traffic-sensitive;(NTS) costs per subscriber.
5. FCC is presently considering petitions to reexamine the difference between
access charges paid by AT&T and by its long distance competitors, to assure fair
competition.
IV. Either the Packwood or Wirth-bill would add billions of dollars annually to long
distance telephone b lls.
to
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A. By delaying (Packwood) or cancelling (Wirth) FCC's planned access charges for
.residential and single line business users, the legislation would shift more than
$3 billion annually back onto long distance bills.
B. Both bills would create a new subsidy for "high cost" local phone companies, on top
of the existing subsidy. The new subsidy. would add $200-million (Packwood) to $500
million (Wirth) annually to long distance bills, and more in future years.
C. Both bills would create another new subsidy for lifeline service for low- income
persons, on top of the FCC's waiver of the two dollar monthly fee. This new
subsidy would add $200 million (Packwood) to $1.5 billion (Wirth) annually to long
distance bills, and more in future years.
V. Artificially high long distance rates from either bill would be unfair and would
damage the economy.
A. Residential users generate more than 46% of the interstate calling (MTS/WATS)
revenue, so they have a big stake in long distance rates.
B. Overpricing long distance service will hurt U.S. productivity and competitiveness
increasingly as information becomes a more important input to all areas of industry
and commerce.
C. Overpriced long distance will encourage large users to build their own systems
that bypass the public telephone system to avoid paying the subsidy, even when this
results in wasteful duplication ofIfacilities.
VI. Both bills impose a bypass tax that would retard innovation and impose huge
administrative and litigatioe costs.
A. Both bills would impose a charge on communications systems that bypass the local
phone company. The bypasser would receive no benefit in exchange for this payment,
so it is actually a.tax.
B. The FCC and the courts would be flooded with wasteful litigation aimed at
determining what. communications services are or are not taxable. For example,
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services offered by cable television systems, and even by radio broadcasters, could
arguably be taxed as "bypass" under either bill.
C. Innovative new communications services would be delayed while lawyers
whether and how much they should be taxed as "bypass".
argued over
David Reed, x7231, January 6, 1984
'0
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