LOCAL RATE INCREASE:
OPPORTUNITY FOR ENHANCING
PERCEIVED CUSTOMER BENEFITS
July 9-11, 2014
TSTCI Accounting and Customer Service Conference
Darla Parker
John Staurulakis, Inc
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OPPORTUNITY & RATE INCREASE
Netflix announced plans to raise prices by $1-2 per
month, initially for new customers but eventually for
everyone, “to acquire more content and deliver an even
better streaming experience.” With the company set to
surpass 50 million streaming subscribers by the second
half of 2014, the price increase could add between $600
million and $1.2 billion to the company’s revenues
within the next two years. Forbes April 2014
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In November 2011, in the USF/ICC
Transformation Order, the Federal
Communications Commission adopted a
rate floor “to ensure that states are
contributing to support and advance
universal service and that consumers are
not contributing to the Fund to support
customers whose rates are below a
reasonable level.”
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FCC ESTABLISHES RATE FLOORS
2012: Residential rate floor established at $10.00
2013: Residential rate floor established at $14.00
2014: Residential Rate floor referred to in the USF/ICC
Transformation Order estimated to be between $16 and
$17. Floor includes state-regulated fees. Future floor to
be determined by national average.
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Survey based
upon Fixed Stand
Alone Voice
Service Rates in
urban areas from
2010 Census
Blocks
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SURVEY SAYS:
On March 20, 2014, the FCC’s Wireline Competition
Bureau announced that the average local end-user
residential rate plus state regulated fees of the surveyed
incumbent LECs in urban areas is $20.46.
47 CFR 54.313(h) sets $20.46 as the rate floor effective
July 1, 2014.
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SUPPORT LIMITATION
47 CFR Section 54.318(b) provides that where residential rates
fall below the national local urban rate floor for standalone
fixed voice service, high cost support would be reduced equal
to the extent to which rates and state regulated fees fell below
the urban rate.
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2014 RATE FLOOR
Dilemmas for carriers included what would be the local
rate to achieve in order to avoid losing high cost support
and would state commission approval be achieved in
time to meet the July 1 deadline?
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RESIDENTIAL RATE FLOOR FOR 2014 - 2018
June 10, 2014, the FCC approved phase-in of the $20.46
rate floor to prevent rate shock. (FCC 7th Order)
• July 1, 2014, rate floor at $14.
• Rate floor of $16, January 2, 2015 through June 30,
2016.
• Rate floor of $18, July 1, 2016 through June 30, 2017, or
the 2016 national surveyed rate, whichever is lower.
• Rate floor of $20, July 1, 2017 through June 30, 2018, or
the 2017 national surveyed rate, whichever is lower.
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RESIDENTIAL RATE FLOOR FOR 2014 –
2018 - RECAP
Link to FCC’s June 10th order:
http://transition.fcc.gov/Daily_Releases/Daily_Business/2014/db062
6/FCC-14-54A1.pdf
Connect America Fund Report and Order, Declaratory Ruling, Order, Memorandum
Opinion and Order, Seventh Order on Reconsideration, and
Further Notice of Proposed Rulemaking
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THE NATIONAL AVERAGE RATE & THE FOURYEAR HORIZON
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TIE RATE INCREASES TO BENEFITS
DESIGNED TO RETAIN CUSTOMERS
• Increase the Customer’s Perceived Value
• By adding to basic service, at no charge, a feature or
features that have perceived value and desirability.
• By expanding the local calling scope where feasible.
• By promoting unique services offered, such as
technology help desk, voice mail.
• By reminding customers of your unlimited calling.
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TIE RATE INCREASES TO BENEFITS
DESIGNED TO RETAIN CUSTOMERS
(CONTINUED)
• Increase the Customer’s Perceived Value
• Convenience as value. Companies have rolled out a
new service, such as on-line payment, new bundled
service, or on-line service applications, accompanying a
rate change.
• Introduce “hidden” features in softswitches or software
which may now have value.
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TIE RATE INCREASES TO BENEFITS
DESIGNED TO RETAIN CUSTOMERS
(CONTINUED)
For the extra revenue, what will your customer get?
What will be delivered? Netflix promises better content
and streaming.
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IMPLEMENTING THE RATE INCREASE
• Timing
• Informing your board and staff for understanding and
approval.
• Informing customers.
• Informing billing vendors in advance.
• Working with your regulatory consultant to achieve your
best timing with regard to filing your minor rate change
provisions under PUCT Substantive Rule 26.171 or as a
partially deregulated cooperative under Rule 26.172.
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Board Approval
PUCT Approval
Customer Accepting Perceived Benefits
Retained Customers and Retained Revenues
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IN SUM
Decide what will be the value you deliver in exchange
for the rate increases ahead.
Target features based on customer service desires.
Where a company chooses not to raise rates to meet a
benchmark, weigh future impacts from reduced high
cost support.
Know that your residential rates in effect December 1,
2014 are the first to be measured with the $16
benchmark.
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QUESTIONS?
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THANK YOU
LET US KNOW HOW WE CAN ASSIST
Contact Info:
Darla Parker
Manager
John Staurulakis, Inc.
9430 Research Blvd. II-200 Austin, Texas 78759
dparker@jsitel.com
Tel: 512.338.0473, Fax: 512.346.0822
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