Court tells telecom giants to pay payphone operators

A 118-year-old business that many used to call profitable is down but not yet out–not out of quarters, anyway.

The state's 30-or-so independent payphone operators–a conveyance nearly made extinct by wireless phones–may begin receiving
refunds next month from AT&T Indiana and Verizon.

The refunds are for excess charges the phone companies billed independent payphone operators for dial tones from 1997 to
2004. Those same phone companies compete against independents with their own payphones and with wireless products.

The refund results from a 2004 ruling by the Indiana Utility Regulatory Commission. That ruling was stayed pending a judicial
review requested by the phone companies, and in April the Indiana Court of Appeals upheld the commission's ruling.

The Indiana Payphone Association is reluctant to specify how much it expects to ring up for the scrappy independents. After
interest, the refund could exceed $1 million, said an attorney for the association.

But five years after independents first brought the case to the commission, and as the July 25 refund date nears, phone companies
are still fighting to postpone the payout.

AT&T, for example, asked the commission to hold off on the principal payment for at least a month while it and the IPA
review issues such as how much interest is due. The phone companies say it would be easier and cheaper to just cut one check
to each independent operator after the total is known.

Enough already, says the association.

"Given that the refund is a decade overdue, justice requires the IPA members' economic needs for prompt refunds
should prevail over any alleged inconvenience caused to AT&T by compiling and issuing multiple reports and checks,"
Nikki Shoutlz, a Bose McKinney & Evans attorney representing the IPA, told the commission.

So contentious is the fight that AT&T fired back in a filing that, no, the IPA "has not waited a decade for the
refund to be implemented" because it failed to appeal the commission's initial denial of a refund, about seven years
ago. "AT&T Indiana has not caused the delay," AT&T's attorneys told the IURC.

The major phone companies "think they can walk on water," saidDavid Hollingsworth, president of Evansville-based
PayFone Plus, one of the state's largest independent payphone operators.

"They've done a masterful job of keeping us at bay," said Troy Brosseau, president of TTI Inc., an Indianapolis
firm that has more than 1,100 payphones in the region. TTI is believed to be the largest of the state's independently
owned and operated payphone firms.

Brosseau isn't expecting the refund to amount to much. And it may be too little too late for some operators.

The number of payphones in Indiana has declined 54 percent, to 20,040 last year, from 43,384 in 1999, according to the Federal
Communications Commission.

The FCC says independents control about 6,500 of those phones: The rest are controlled by AT&T, Verizon and other phone
companies.

"It's truly a David and Goliath story," Brosseau added.

But what drives anyone to persist in the payphone business-a- niche that even the big phone companies are gradually exiting
for more lucrative products such as video service?

There's still a need, said Tom Tucker, president of the IPA. "Not everyone can access a cell phone."

Some don't have decent enough credit to get a conventional or wireless phone. If you need to call an ambulance in some
neighborhoods, a pay phone "is the only way," said Hollingsworth, "unless you can shout loud enough."

"There's still a group of people who truly depend on our service. It's almost become a two-class society,"
Brosseau said.

Indeed, his payphones are in the most plebeian of public places: the City-County Building, in city parks, public libraries
and at Wishard Hospital.

Brosseau and his fellow independents argue they provide a public service. During the 2001 terrorist attacks and after natural
disasters, it's often the payphone–not the wireless phone–that is still working, he said.

Brosseau said he's been "passionate" about the payphone business since starting his in the mid-1980s. Now it's
a small part of his main business, Tel Tec Inc., 1302. S. High School Road, which focuses on business communication services.

The payphone unit, TTI, has survived partly by carefully choosing locations with steady traffic. Its phones also provide
5-cent-a-minute long-distance–a better deal then some wireless services, Brosseau figures.

TTI also has made extensive use of computerization. If a phone has a problem it calls home–reducing outage time and minimizing
the need to dispatch a service crew needlessly to check its status.

"Efficiencies are the key. … My interest right now is simply to continue to operate it at as much profit as I possibly
can."

PayFone Plus' Hollingsworth said the phone companies' overcharges left him with less money to reinvest in his service,
for the benefit of customers.

He still has 35-cent payphones while some competitors charge 50 cents. Had the playing field been level, he figures he could
have been more generous. "The public got cheated."

But many independents couldn't help but feel cheated every year the refund battle played on.

It began in the late 1990s, when Congress passed telecommunications reform and the FCC came out with a new test of how rates
should be applied to payphone operators.

The IPA challenged phone companies before the IURC in 1999. The commission rejected the challenge, saying the rates appeared
reasonable.

In 2002, the IPA filed the current case at the IURC, challenging whether phone companies in Indiana actually followed the
FCC rule on determining rates charged to payphone operators.

The IPA argued successfully that the phone companies failed to take into account other sources of revenue that resulted in
excess recovery of costs.

But AT&T and other carriers took the commission to court in 2004, arguing that its decision "presented a very troubling
legal precedent that allowed the IURC to retroactively reduce rates after they approved rates," said AT&T spokesman
Mike Marker.

The court did not find the commission was conducting retroactive ratemaking. The battle continues over how much interest
is due on the upcoming refunds, while the phone companies file new tariffs that are in compliance with the FCC test.

Even if independents get all they wanted in refunds, the long-term future is bleak for a device widely credited to inventor
William Gray. He placed the first public coin telephone in a Hartford, Conn., bank in 1889.

"It isn't the business it was 10 years ago," said Brosseau, who recently diversified into an even lower-tech
segment of the coin realm: coin-operated air pumps at gas stations and convenience stores.

With gas prices soaring, more motorists are inclined to check their tire pressure to maximize fuel economy, he figures.

"If you had told me even three years ago I'd have been in this [air pressure] business, I would have laughed at
you."