Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Price Reform and Universal Service: Not Mutually Exclusive

Fortnightly Magazine - March 15 1996

that the 1989 LMS local-line charge was in effect prior to that year and that no rate increases occurred after 1992.

3. All the MSAs not served by Ameritech as primary toll carrier are still under flat-rate service.

4. The supplemental line charge has since risen to $3.50.

5. Re Illinois Bell Tel. Co., No. 89-0033, Nov. 9, 1989, 108 PUR4th 89 (Ill.C.C.).

6. This analysis of the commission's order is based on the Illinois Bell publication, supra, note 2.

7. Perl, Lewis, Residential Demand for Telephone Service 1983, prepared for Central Service Organization of the Bell Oprating Companies, Inc., National Economic Research Associates, Inc., White Plains, NY (Dec. 1983), as reported in Taylor, Lester, TELECOMMUNICATIONS DEMAND IN THEORY AND PRACTICE, pp. 86-88 (Kluwer Academic Publishers, Boston, 1994). This figure reflects Per's 1983 telephone access demand equation. Perl's model confirms that access demand is primarily a function of minimum access charges.

8. See, Gordon, Kenneth and Haring, John, "The Effects of Higher Telephone Prices on Universal Service," OPP Working Paper Series, Working Paper No. 10 (March 1984) p. 17.

9. Elasticity of demand at the city level is not expected to be greater than at the state leve. A statewide estimate reflects rural areas that might have more inelastic demand because the availability of substitutes such as convenient access to pay phones decreases in these areas. Thus, the predicted change in demand for telephone access should fall by a smaller amount as the price of access increases.

10. The staggered panel examines residents at particular addresses for four consecutive months in one year, and for the same four months in the following year. See, Belinfante, Alexander, Telephone Subscribership in the United States, FCC (March 1994), pp. 2-3.

11. However, there is a significant degree of seasonal variation in the "telephone in unit" statistics (see, Belinfante, supra, note 10, p. 3).

12. The critical value based on telephone units, 2.1, multiplied by 0.5774 yields 1.21254, which is greater than the 0.1 percentage change in telephone subscription for Illinois during the period 1985 through 1993 (see, Belifante, supra, note 10).

13. The picture in earlier years is muddied by the phased implementation. Downtown Chicago alwasy had mandatory LMS; Access Areas B and C experienced rate cuts and increases in basic access (including the subscriber line charge) in 1987, with the required switch to LMS from flat rate service.

14. The elasticity estimates are based on the Perl study assuming an initial penetration rate of 93 percent(emapproximately the level of penetration in Illinois in 1990. See Taylor (supra, note 7), p. 93.

15. See, Hausman, Jerry, Tardiff, Timothy, and Belinfante, Alexander, "The Effects of the Breakup of AT&T on Telephone Penetration in the United States,) American Economic Review, Vol. 83, No. 2 (May 1993), pp. 182-83. The authors claim the SLC accounts for approximately one-third the average price of measured-rate basic access. Accordingly, using own-price elasticity, increases in the SLC would lead to a predicted decline in penetration. They determined that lower long-distance rates worked a positive effect on penetration of approximately three times the