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In the late 1980s and 1990s, other state legislators were reducing telephone rates, while in Michigan our legislators passed Act 179, known first as The Michigan Telecommunications Act of 1991, and then amended by Act 216, The Telecommunications Act of 1995. Under the guise of promoting competition, these acts have cost Michigan residents and businesses millions and perhaps billions of dollars.
Other progressive states realized that the cost of providing telephone service in the late 1980s and 1990s was declining. The dramatic decreases in the cost of borrowing coupled with technological changes, growth in customers and new services all pointed toward a reduction in rates. In Michigan, while service suffered, the phone company cut the number of employees. In spite of this, the Michigan Public Service Commission did nothing to reduce phone rates to reasonable levels.
The Commission did adopt an incentive regulation plan which was nothing more than a sham. Current rates were not evaluated and no studies were done to see if rates were reasonable. Instead a plan was adopted that allowed for some refunds if the phone company earned over a certain rate of return. This plan only lasted a year and was superseded by the first of the two Telecommunication Acts.
This act allowed the phone company to limit the number of local phone calls to 400 and provided for an alternative rate for local calls that did not exceed 50. Previously the basic rate allowed for an unlimited number of local calls. This, in of itself, increased the cost to many residential customers. The plan virtually guaranteed the phone company annual rate increases in spite of continually falling costs coupled with increased revenues from existing and new services. There was one provision of the Act that provided some future relief for ratepayers. Customers were to be provided full intralata dialing parity by December 31, 1995. This would have allowed all customers to make zone and "local toll" calls with an alternative carrier without first dialing a cumbersome access code. This, of course, was dramatically revised in the 1995 Act.
It's clear that the Telecom Act of 1991 was heavily promoted and perhaps written, at least the initial draft, by the phone company. One only has to look at the lobbying expenditures by the phone company in 1991 and the years before and after to see the dramatic increase in dollars spent. I presume most of these dollars as well as PAC contributions went to influence the passage of this legislation.
Clearly this legislation was written by the phone company. Although there may have been some legislative changes, I am sure the phone company got everything it wanted from this legislation. The provision to provide full intralata dialing parity was watered down and I only was able to began to make zone and "local toll" calls with a competitive carrier without using an access code on May 12, 1999. Of course the Act was effective at the beginning of 1996.
The Act continued to virtually guarantee the phone company annual rate increases. Customers saw an increase in their bills of $1.45 , then raised to $3.28, for a "State access charge". This was provided for under this Act. Customers have seen dramatic increases in the cost of "local toll calls" so that it now costs 25¢ per minute to make a "local toll call" during the day. Although the charge is referred to by different names, there were dramatic increases in the PIC C charge. This is a charge that the local phone company billed the long distance companies. Some long distance companies refer to it as an "access charge". All of these monies went to the local phone company even though they are billed by the long distance company. The Act allowed the phone company to match the federal charge and the phone company has done just that. Effective July 1, 2000, the PIC C charge was eliminated. In turn the phone company increased the Federal Access Charge.
The Act was to provide some protection for customers against the release of proprietary customer information. The Act directed the Commission to write rules to safeguard this valuable proprietary information. A rule was written but it did not address this very important area. The Act said one of the purposes was to promote competition. While many licenses have been granted to provide local phone service, one must ask whether or not there is any competition and how effective is it.
The Telecommunications Act of 2000 replaced the Telecom Act of 1995. While it contained some good provisions, the phone company and others have challenged some the provisions in Court. There was a provision to eliminate the State Access Charge and to freeze basic rates. The Court has unwisely sided with the phone companies and the State Access Charge has been added back to the bill and recently the phone company put a rate increase into effect. The provision to expand the local calling area was watered down to such an extent by the Public Service Commission that it provided no relief to those in the Metropolitan Detroit Area.
What can be done?
Probably very little. I have a copy of a MEMORANDUM to the Republican Caucus Members from the Chair of the the House Public Utilities Committee dated November 7,1995. The purpose of the memo was to set the record "straight" about the many different answers and "misleading information" concerning the legislation that later became the Telecom Act of 1995. It's clear to me that after reading the Memo, the legislators had no clue about many of the negative ramifications of the Act. Of course, there is no mention of the portion of the Act that provided for the the State Access Charge and the State matching PIC C charge (This charge was subsequently eliminated but replaced by a higher access charge.) . These provisions alone have and will continue to generate millions of dollars per month in revenues for the phone company.
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