Sprint, Cincinnati Bell want out of annual pay phone audits, cite rapid usage declines, costs

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There are currently fewer than 500,000 pay phones in the entire U.S. and about 1.7 billion calls are placed each year.

Sprint and Cincinnati Bell have each asked the FCC in separate filings to be relieved of having to conduct annual pay phone audits.

While there are still operational pay phones in the United States, the two service providers point out the lower usage due to the advent of cellphones.

In its FCC filing (PDF), Sprint has asked for a waiver of the June 30, 2017, deadline so the regulator can consider Sprint’s waiver petition without Sprint having to begin the audit.

“Sprint requests a waiver of the annual audit requirement because the dramatic decline in payphone calls over the past decade has resulted in an audit requirement that, in Sprint’s experience, is unduly burdensome,” Sprint said in its filing. “Sprint projects that the costs of the audit alone will be approximately 15 percent of the per call compensation Sprint paid in 2016.”

Sprint added that that figure is “15 percent of the compensation paid, not Sprint’s profit.” While much of its filing was blocked out, Sprint noted that pay phone compensation has declined 99.5% since its peak in 2005. However, Sprint said that the “audit costs have not fallen proportionately to the precipitous decline in the amounts being paid” but instead have risen.

Interestingly, Sprint’s audit partner, KPMG, said it has found it challenging to actually locate “pay phones with which to make test calls pursuant to the audit requirements.”

Burden for smaller providers

Cincinnati Bell Any Distance (CBAD) said in an FCC filing (PDF) that a pay phone audit requirement places an “unnecessary burden on small carriers.” The service provider, which mainly operates in Cincinnati, echoed a similar low usage of pay phones in the regions it serves.

“For small long-distance providers like CBAD, the cost of the audit vastly exceeds the amount of payphone dial-around compensation due to payphone owners,” Cincinnati Bell said. “While the cost of the audit has remained relatively fixed over the last ten years, the number of payphones has declined precipitously.”

Cincinnati Bell noted that the cost of CBAD’s annual pay phone audit is over 5 times “the amount of dial-around compensation that it owes to payphone owners for the year,” adding that besides the “cost for the independent auditor, completing carriers must devote internal resources to work with the auditors to complete the audit plan.”

Since the current pay phone compensation process has been in place for over 10 years and “independent third-party auditors have consistently found that CBAD is compensating payphone providers for all compensable calls,” Cincinnati Bell said “the compensation process is well established and works smoothly.”

Cincinnati Bell added that “most long distance providers use a clearinghouse, such as the National Payphone Clearinghouse (“NPC”), to process quarterly payments and the NPC has an effective investigation and dispute resolution process in place to address any disparities between completing carrier and payphone provider data that arise.”

Telcos, public transit cut ties

Cincinnati Bell and Sprint’s concerns aren’t totally unfounded and reflect the plummeting usage in pay phones as more consumers have made cellphones their primary voice communications device.

Such low usage trends are also driving cities and towns like Springfield, Massachusetts, to forgo the installation of pay phones in key public transit sites like the revitalized Union train station. Citing city officials in charge of the rehabilitated Union train station, MassLive reported that the site will not have any pay telephones.

According to an American Public Communications Council study, there are fewer than 500,000 pay phones in the entire U.S. and about 1.7 billion calls are placed each year.

Over the past decade all of the large service providers, including AT&T, Verizon, and FairPoint, have sold off their pay phone operations. AT&T sold off its last pay phone systems in 2008. Likewise, Verizon—which once operated nearly half a million pay phones nationwide—sold its last 50,000 to Pacific Telemanagement Services (PTS) in 2011. FairPoint sold off its 4,000 phones in New England to PTS in 2012.