Tuesday, December 23, 2008

Pennsylvania Orders Verizon to Offer Discounted Bundles to Lifeline Customers; Where Is New York?

In a decision released on December 18th, the Pennsylvania Public Utility Commission ("PA PUC") issued an Order requiring Verizon to offer discounted bundles to its Lifeline customers. Until now, Verizon's tariffs in Pennsylvania prohibited Lifeline customers from subscribing to service packages which include local, toll, and optional services. In New York, by the way, Verizon's tariffs continue to prohibit Lifeline customers from participating in service bundles.

The PA PUC acted in response to a complaint filed in July 2007 by the Pennsylvania Office of Consumer Advocate, the Pennsylvania Utility Law Project, and AARP Pennsylvania which alleged that Verizon was violating the law because its tariffs prevented Lifeline customers from subscribing to these service bundles. Verizon responded that low income customers could not afford so-called "deluxe" packages, so the complainants proposed that three common discounted packages be made available to Lifeline customers: Local Package (Local and three vertical services at $27.95/month), Regional Essentials (Local, three vertical services, and regional toll at $36.00/month), and Freedom Essentials (Local, three vertical services, regional toll, and long distance at $39.95/month). Verizon argued, among other things, that there is no legal justification to permit Lifeline customers to receive discounts on any services other than local. An Administrative Law Judge ("ALJ") supported the ability of Lifeline customers to subscribe to these three discounted packages.

The PA PUC agreed with the ALJ's rejection of Verizon's claim that the Lifeline credit cannot be provided to customers who purchase local service as part of a package of services. The agency held that "[t]here is no legal basis for Verizon's position that it may deny Lifeline 135 eligible consumers the federally funded discount when they purchase local calling as part of a bundle with other services. Verizon's Lifeline 135 and related tariff restrictions result in forcing Lifeline 135 eligible consumers to pay the federal SLC [subscriber line charge] and miss out on the additional $1.75 Lifeline discount on the dial tone and local usage." (In Pennsylvania, the Lifeline program is referred to as Lifeline 135 since customers are eligible to participate in the program if they earn up to 135 percent of the federal poverty level). Further, the PA Commission found that "[t]he Lifeline discount is a credit that eligible customers are entitled to receive and for which Verizon is made whole by the Federal Universal Service Fund. The Lifeline credit does not reduce Verizon's revenues." It added that "the Lifeline credit is not applied to long distance service, and no company . . . loses revenue as a result of applying the Lifeline credit against the subscriber line charge and a portion of local service."

Verizon was directed to update its tariffs and remove the prohibition within 20 days of the Order.

While this decision is a victory for low income telephone customers in Pennsylvania, it does limit the availability of service packages to the three mentioned, which are far fewer than other (non-low income) customers may be offered. The decision also requires Lifeline customers to pay the full "discounted" price for the package. What Verizon should be required to do is calculate each portion of the discounted package rate (such as local, toll, and long distance) and substitute the Lifeline rate that the low income customer would otherwise pay for the full price local portion of the package. This would make the packages even more attractive (and affordable) to Lifeline customers.

Should these changes prove successful, Lifeline enrollment will increase significantly in Pennsylvania, along with overall subscribership. That is the true purpose of the Lifeline program.

Verizon added a similar restriction on Lifeline customers in its New York tariffs several years ago, which were allowed to take effect by the PSC despite past rulings of the PSC (when it had members more tuned in to such issues) that there should be no restiction of vertical service choices for persons receiving Lifeline assistance for local service.

A wise man once told me that low income telephone customers are just like everyone else and want to subscribe to other services such as voice mail or call waiting (especially if there are multiple people in the residence), but they can't afford them. As a result, they either pay far more for telephone service than they should in order to get the other services they desire or the low income customer goes to the local cable company in order to receive a package of services, but also pays more than they should because the cable company does not offer Lifeline. The time has come for Lifeline customers in New York to be able to subscribe to discounted packages as well. Unlike Pennsylvania, the Lifeline discount should apply to the local portion of the package. That few extra dollars a month can really make a difference to struggling families, especially in today's economic climate.

Also, if the New York PSC changed its policies to achieve Lifeline phone service cost reductions to all 900,000 Food Stamp households, it could ease their tight budgets and financial burdens significantly. Instead, in recent years New York state's Lifeline enrollment has fallen from over 700,000 to less than 300,000, no doubt due in part to the failure of the PSC to be proactive in requiring or encouraging all phone service providers to offer meaningful Lifeline discounts to low income subscribers.

Lou Manuta

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