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Issue: 1986 January 15 - Vol 12 Num 1

COCOT industry
faces
confusing patchwork
by Marcia J. Thompson
As
1986 begins, the consumer-
owned coin-operated telephone
(COCOT) industry is poised at the
starting line across the country. While
the industry may be off and running in
a few of the 30-odd states in which
regulations have permitted manufac-
turers and distributors to submit
tariffs, in many states the final arrange-
ments still are being worked out.
Federal Communications Commis-
sion Rule 68's dictum that each state
will act on its own information to set its
own tariffs and make its own rules has
created a confusing patchwork that
will have to be made more uniform if
the industry is to bound ahead in the
year to come.
Restrictions ranging from the
hands-off attitude of the Texas utilities
· regulatory board to the tough rules of
New Jersey and California make it
difficult for buyers and distributors to
decide what products are workable
and which to leave alone. On the other
hand, the uneven requirements create
an environment in which only the best
systems are safe buys. This time next
year, a trimmed-down, sleeker indus-
try will be operating in a more hospi-
table regulatory environment.
The most important fact about the
industry today, said Jim Kaufman of
Capital Tel Systems in New Jersey, is
that there is an industry. There are 1.6
million private pay phones producing
more than $4 billion in annual reve-
nues, more than $2.8 billion of that in
long distance. This year will be the
first, said Kaufman, in which the
general public will become seriously
aware of private pay phones as an
10
alternative to Bell. In spite of the diffi-
culties imposed by ornery public-
utility commissions in many states, the
industry is moving rapidly to upgrade
and standardize equipment and to
convince the state agencies and Bell
operating companies (BOCs) that it is
not going away, and, furthermore , that
the industry can be beneficial to BOCs
and the regulators in ways they have
not yet recognized.
With more than 50 manufacturers
producing phones in a wide range of
prices, there have been products that
displeased customers and BOCs. An
example is the push-to-talk phone,
referred to by Kaufman as "zero-gen-
eration" equipment. Consumers were
not receptive to a mute handset that
required that a button be pushed, as
with a radio or intercom system,
before one could speak. If the user
forgot to push the button and was not
heard, the listener on the other end
would hang up in frustration and the
quarter would clink into the vault.
These models have been violently van-
dalized by angry callers, according to
Kaufman. Experiences such as these
have led industry leaders to accept the
need to make their phones as much
like Bell's as possible to make them
customer receptive.
Other problems have occasioned
lengthy discussions in print over the
question of whether they would cause
the industry to fold in certain states.
These problems offen have been
resolved before the ink dried. An
example is the need for a clock/ calen-
dar to make daily as well as hourly rate
changes to mirror Bell's tariff schedule.
When the requirement was made in
California it looked as if the extra
expense of having service personnel
manually change the clocks on each
phone for each holiday would be pro-
hibitive. Now there is a new computer
chip with a 188-year calendar, and
many phones can be retrofitted easily
to solve the problem.
The California story
Many industry optimists believe
Bell cannot help realizing the mutual
benefit the private and public systems
can share. California's Pacific Bell is
considering getting into the business
itself. To date, it is the only regulated
entity that has been licensed to sell its
sets. Jean Green, Pacific Bell project
manager, said the company has been
authorized to file a tariff, but it has
hesitated. In fall 1985 both Bell and
private companies who stood to profit
from the maintenance of Bell's sets
once they were sold were enthusiastic
about the prospect of a symbiotic
relationship. But new regulations from
the California State Public Utilities
Commission limiting commissions
have caused Bell to reconsider
whether it wants to participate, and
indeed whether it wants to do any-
thing to stimulate the industry in the
state. "The industry is here, it's not
going away," Green said, "but at this
time we're undecided how we will
proceed."
Charles Haff, president of Phone
Master Corp . in San Francisco,
believes his firm will work with Pac Bell
to pick up maintenance, service, and
rate-change reprogramming responsi-
PLAY METER, January 15, 1966
bility after the Bell warranty runs out.
He thinks it is inevitable that the Bell
companies will want to get out of the
phone-maintenance and equipment
business and the union problems that
go with it. They have already, said
Haff, signed over booths and outdoor
pedestals to outside contractors.
Sheldon Katz of American Pay
Phone Systems of Woodland Hills,
Calif., agrees with Haff that California
is one of the more friendly environ-
ments for the industry. In fact, Pac Bell
has purchased American Pay Phone's
product, a retrofit kit made by Hibbing
Electronics for Northwestern Bell
Technologies.
The kit can provide the smarts for
either GTE or Western Electric sets.
"The private pay market has been
waiting for the technology to catch up
with the market," said Katz. "With the
Northwestern Bell Technologies
development of the retrofit kit , it has
brought tremendous credibility to the
private pay market."
The phones
Some manufacturers are assuming
there will be a two-tiered market, one
calling for the smartest of phones that
can handle the most complex tariff
restrictions while protecting owners
from losing money to credit-card and
long-distance calls, the other needing
a low-cost phone with no frills . An
example of this approach is Coin
Communicators' line. The company's
first phone, the Model 101 (not to be
Some manufacturers
are assuming there will
be a two-tiered market,
one calling for the
smartest of phones,
the other needing a
low-cost phone
with no frills.
confused with the Model 101 manu-
factured by American Pay Phone
Systems) , is a post-pay, quarters-only
rotary machine that requires no
access voltage. It sells for less than
$600. Its upscale model 2000W has
most of thoe frills-a visual display
(but no voice), GTE housing, down-
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PLAY METER. January 15, 1986
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loading capability, and pre-pay. It does
not take credit cards yet. It will be
interesting how this model competes
with the higher priced /ntellicall, which
the same company distributes in Indi-
ana under its model name R3000. Rick
Stephan of Coin Communications
believes the low-cost phone designed
for the "Betty's Beauty Shop" market
will make it easy for small operators to
buy and will appeal to Bell, which, he
believes, would like to get out of the
market and save the expense of route
runs to these out-of-the-way locations.
Tel-Com lnternational's Digitronics
line offers a lower-cost smart phone
with the basics required by the FCC
but no international long distance and
other luxuries. This phone can be
afforded by customers who cannot
buy an Intellicall, which Tel-Com also
distributes in Illinois. Tel Com has
added an interesting dimension to its
system-a central office with live
operators.
Another market consideration is
the attractiveness of a phone to
operators. Cointel's SuperCall phones
appeal to the market with claims of
superior security. The SuperCall has
a 12-gauge steel case and two locks on
the coin vault. It is made so that the
service person has no access to the
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(800) 262-RAND
(602) 272-2000
11

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