In re Show Cause Proceeding to Amend the Billing & Collection Tariffs of South Central Bell

779 S.W.2d 375, 1989 Tenn. App. LEXIS 233
CourtCourt of Appeals of Tennessee
DecidedMarch 22, 1989
DocketNo. 88-177-11
StatusPublished
Cited by16 cases

This text of 779 S.W.2d 375 (In re Show Cause Proceeding to Amend the Billing & Collection Tariffs of South Central Bell) is published on Counsel Stack Legal Research, covering Court of Appeals of Tennessee primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Show Cause Proceeding to Amend the Billing & Collection Tariffs of South Central Bell, 779 S.W.2d 375, 1989 Tenn. App. LEXIS 233 (Tenn. Ct. App. 1989).

Opinion

HIGHERS, Judge.

This action is a petition for judicial review of a Final Order of the Tennessee Public Service Commission (PSC)1 under T.C.A. § 4-5-322 (Supp.1988) requiring certain telephone companies to amend their billing procedures. It is an unusual and complex case both procedurally and substantively.

The substantive complexity of this case is mitigated by an overview of the companies and billing procedures involved. Local Exchange Companies (LEC’s) are those which provide local telephone services. The LEC’s may, under regulations, supply service to other exchanges (inter-exchange service) within what is known as Local Access Transport Area (LATA). Calls from an exchange in one LATA to an exchange in another (inter-LATA calls) cannot be handled by the LEC but are handled by long distance companies. This action is concerned with non-local, operator assisted calls, the companies which provide those calls, and the methods by which those calls are billed.

Until the mid-1980’s, AT & T had a virtual monopoly on operator assisted calls. Beginning at that time, several alternate operator service providers (AOS’s) were formed. Entry into the operator service market by AOS’s has typically been aimed at certain industrial customers rather than at the general public, and although some AOS’s apparently aspire to expand into providing services for the general public, at the present these industries are the exclusive market.

At the present, marketing operator services to individual members of the public would be highly impractical for the AOS’s for a number of reasons. By marketing their services to certain private industries, the AOS’s reach larger segments of the public as aggregated by these industries. The target industries are those which provide telephones for use by their own clients and customers, such as hospitals, hotel/motels, and universities. Also targeted are the owners of on-premises pay phones, for example, convenience markets. These are referred to as “customer owned coin operated” telephones (COCOT’s). (For convenience, COCOT’s and their owners are included in references to industrial or institutional owners unless otherwise noted.)

The AOS’s contract with the institutional phone owners to provide operator services for calls made from their phones. When a caller using an institutionally owned phone dials “0,” he is automatically connected to the operator service provider with which the owner of that phone has contracted, be it AT & T or an AOS. The operator collects billing information from the caller — a credit card number, home telephone number, or a request for a collect call — and then completes the call. If made from a touch-tone telephone, it is possible for the caller to provide billing information and [377]*377complete his call without ever actually speaking to an operator. The caller does so by entering a credit card number upon hearing a prompt.

The regulations, which are central to this case, permit inter-exchange carriers, including AOS’s, to use the billing and collection services of LEC’s. Therefore, not only does the bill from the LEC include the intra-exchange and inter-exchange/intra-LATA calls handled by the LEC, it includes inter-exchange calls handled by companies other than the LEC, provided the company handling the call has a billing and collection agreement with the LEC.

The AOS’s complete operator assisted calls using facilities owned by an LEC or an inter-exchange carrier (IXC), paying them under either contract or tariff. The billing and collection for the AOS’s is handled by the LEC’s under contract, and nonpayment subjects the caller to LEC sanctions, which can mean termination of all telephone services. Some of the revenue collected goes to the carrier to pay for the facilities to handle the call. Some of the AOS revenues go to the hotel, hospital, university or COCOT owner with whom the AOS has contracted. This allocation of revenues is important to the issue in this case.

First, the AOS does not charge the institution with whom it contracts for its services; rather, the calls are billed to the caller, and the institution shares in the revenues. Second, the AOS’s actually provide only operators and switching equipment as a part of handling a call, and rely on the LEC’s and IXC’s to provide the carrier facilities. The LEC’s and IXC’s are also paid for the services they provide.

These facts place the AOS’s in a position not to be cost competitive, but rather revenue competitive. Because the AOS is trying to attract the business of the institution, it competes by offering higher returns to those telephone owners. Those higher returns come from greater revenues which in turn come from higher calling fees charged to the caller using the institution’s phone. Thus the AOS is most competitive by charging the highest possible amount to the caller, and the caller is captive in that he or she did not, as a customer, choose the AOS — the institution, who shares in the revenue did. In order to avoid these excessive charges, the caller must sometimes find a telephone not under contract with the AOS. Because of lost revenues, AOS’s are reluctant to transfer the calls to another long distance service even if the caller so requests. Sometimes the owner of the phone will, under its contract with the AOS, prohibit the AOS from transferring the call to another company as the telephone owner would miss his share of the AOS revenues, or possibly subject himself to having to pay for the transferred call himself.

The inconvenience of paying a higher charge or finding a phone not under a contract with an AOS is not the primary problem which the PSC attempted to address. The AOS’s, like any provider, may under fundamental principles of economics, charge whatever rate the market will bear. If the AOS price is too high for a given call, that caller will either find another way to make the call, or simply not make it at all. However, callers using AOS’s are often not given the opportunity to make that choice. The caller may be unaware that he or she has used an AOS until billed for the call through the billing procedure described above. This is especially true where the caller keys in a credit card number without actually talking to an operator. Thus, the AOS insulates itself from the caller by marketing not to him, but to the telephone owner, and the caller is not actually an unwill ing consumer but an unwitt ing one.

This unwitting use of an AOS is exacerbated by the fact that the caller may key-in or give verbally the number from an AT & T credit card with the assumption that AT & T is handling the call at a standard rate with which the caller may be familiar. In other words, the AOS is able to use the numbers from the AT & T card to determine the caller’s LEC billing number, and then bill the caller through the LEC. The record contains over eight pages of excerpts from complaints which repeatedly bear out this fact. A number of these [378]*378excerpts make reference to the fact that the caller had never heard of the particular AOS which handled the call. Others make reference to the fact the caller specifically thought they were using AT & T.

There have been other complaints registered against AOS’s, including the refusal of some AOS’s to transfer the caller to another company as noted above.

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Cite This Page — Counsel Stack

Bluebook (online)
779 S.W.2d 375, 1989 Tenn. App. LEXIS 233, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-show-cause-proceeding-to-amend-the-billing-collection-tariffs-of-tennctapp-1989.