http://www.thefrontlines-hlg.com/ The FRONT LINES
Advancing The Cause of Competition in the Telecommunications Industry
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FCC TAKES FIRST STEP TOWARD INTERCARRIER COMPENSATION REFORM
On February 10, 2005, the Federal Communications Commission ("FCC")
initiated a rulemaking proceeding whose goal is to replace the outdated
intercarrier compensation system with a uniform regime suited for
competitive markets and new technologies.
The current system relies on per-minute intercarrier payments that
distinguish between different types of carriers and services, such as
local and long-distance, or wireless and wireline, even though these
distinctions often have no bearing on the cost of providing service.
Furthermore, new technologies, such as Internet telephony, and new
service offerings, such as bundled flat-rate packages, have eroded
The FCC began its long trek towards reforming intercarrier
compensation over four years ago with its 2001 Intercarrier
Compensation NPRM. Although no rules ever resulted from this
proceeding, the record developed therein gave rise to four suggested
common themes for reform.
First, any approach should encourage the development of efficient
competition and the efficient use of and investment in
telecommunications networks. Second, any approach must preserve
universal service support, which ensures affordable rates for
consumers living in rural and high-cost areas. Any proposal that would
result in significant reductions in intercarrier payments should
include a proposal to address the universal service implications of
such reductions. Third, any approach must be technologically and
competitively neutral. Finally, an approach that requires minimal
regulatory intervention and enforcement is consistent with the
competitive deregulatory environment of the 1996 Telecommunications
Act. Proposals that rely on negotiated agreements between carriers
might be preferable to regimes requiring detailed rules and
The FCC is seeking comment on seven comprehensive reform proposals
submitted by the industry and others in the rulemaking. Among the
questions the Commission will examine is the effect any change will
have on consumers and the universal service fund, which helps provide
affordable service for rural and low income Americans. The Commission
said it would be "particularly receptive" to any plan that offers
expanded choices and lower rates to rural consumers.
Following is a list of the groups submitting reform proposals and a
brief description of their plans:
* Intercarrier Compensation Forum (ICF). The group represents a
diverse group of nine carriers. The plan would reduce most per-minute
termination rates from existing levels to zero over a six-year period.
* Expanded Portland Group (EPG). The group is comprised of small and
mid-sized rural LECs. Its two-phase plan would eventually convert
per-minute intercarrier charges to capacity-based charges.
* Alliance for Rational Intercarrier Compensation (ARIC). ARIC
represents small rural providers serving high-cost areas. Its Fair
Affordable Comprehensive Telecom Solution (FACTs) plan would unify
per-minute rates at a level based on a carrier's embedded costs.
* Cost-Based Intercarrier Compensation Coalition (CBICC). The
coalition represents competitive local exchange carriers, or CLECs.
The plan would create a cost-based termination rate in each geographic
area for all types of traffic.
* Home Telephone Company and PBT Telecom (Home/PBT). Home and PBT are
rural local exchange carriers. The plan would replace the current
regimes with connection-based intercarrier charges.
* Western Wireless. Western Wireless is a wireless carrier that
receives universal service support in 14 states. Its plan would reduce
intercarrier charges in equal steps over four years to bill-and-keep.
* NASUCA. NASUCA is the National Association of State Utility
Consumer Advocates. NASUCA's plan would reduce certain intercarrier
rate levels over a five-year period.
To read these plans in their entirety, visit the FCC's web site at
http://www.fcc.gov/wcb/ppd/. Links to the plans can be found under the
heading "Intercarrier Compensation Reform."
FCC PROPOSES REDUCTION IN CARRIER CHANGE (PIC) CHARGES
On February 10, 2005, the FCC announced the adoption of rules aimed at
reducing the cost to consumers of switching long-distance providers.
The current rate of $5 could be reduced to $1.25 under the
Commission's new rules. These rates would apply when long-distance
carriers order the changes electronically rather than manually. For
manual changes, the rates could increase slightly, to $5.50.
Local exchange carriers, which receive the fees for switching a
customer's pre-subscribed long-distance carrier, can charge more if
they can document higher costs. However, local carriers that adopt
the new "safe harbor" rates are free from the expense of submitting
detailed cost information. Local companies can also charge less than
the safe harbor rate if they choose.
When consumers switch both interstate and intrastate long-distance
providers at the same time, the charge for changing the interstate
provider is cut in half, from $1.25 to 63 cents for electronically
processed changes. The FCC has no authority to reduce the intrastate
charge, which is set by each state.
The Commission found that electronic processing and other changes in
the industry have reduced the cost of switching carriers since the $5
fee was adopted in 1984. The order creates an incentive for
long-distance carriers to invest in electronic processing so that fees
charged by local providers won't deter customers from signing
up. Long-distance companies sometimes voluntarily pay these fees to
attract new customers, but they are not required to do so.
Local carriers that haven't installed systems capable of processing
electronic orders would not be required to do so if the investment
isn't economically rational. These carriers may charge the safe
harbor rate for manual changes.
FCC ADOPTS RULES TO IMPROVE EXCHANGE OF CUSTOMER INFORMATION BETWEEN
ILECs AND IXCs WHEN CUSTOMERS SWITCH PREFERRED PROVIDERS
The Commission has adopted new rules that will help ensure that
consumers' phone service bills are accurate and that their carrier
selection requests are honored and executed without undue delay. The
rules specify a number of situations in which carriers must share
customer information with each other.
The proceeding began with a Notice of Proposed Rulemaking released on
March 25, 2004. It asked parties to address the magnitude of the
billing problems ascribed to carriers' failure to exchange customer
account information among themselves in a complete and/or timely
manner and whether the adoption of mandatory, minimum standards could
significantly reduce the percentage of consumer complaints concerning
Upon a review of the record, the FCC concluded that mandatory, minimum
standards are needed to facilitate the exchange of customer account
information between local exchange carriers (LECs) and interexchange
carriers (IXCs). The FCC pointed to evidence demonstrating that
information needed by carriers to execute customer requests in a
timely and efficient manner and to properly bill customers was not
being consistently provided by all LECs and by all IXCs.
Comments by a group of telephone companies reported, for example, that
nearly 60 percent of approximately 3,065 wireline local service
providers do not participate in any exchange of customer account
information. As a result, on average, approximately 163.7 million
calls per month (nearly two billion calls per year) are placed on
their long distance networks by subscribers for whom the long distance
provider has received no customer billing name and address
information. The Commission noted that complaints to its own Consumer
Centers also indicated continuing problems caused by lack of
information sharing among companies.
Under the new rules, a LEC will be required to supply customer account
information to an IXC when: (1) the LEC has placed an end user on the
IXC's network; (2) the LEC has removed an end user from the IXC's
network; (3) an end user that is presubscribed to the IXC makes
certain changes to her account information via her LEC; (4) the IXC
has requested billing, name and address (BNA) information for an end
user who has usage on the IXC's network but for whom the IXC does not
have an existing account; and (5) the LEC rejects an IXC-initiated
order to change a customer's presubscribed interexchange carrier
(PIC). In addition, an IXC will be required to supply customer
account information to a LEC when an end user contacts the IXC
directly either to select or to remove the IXC as his PIC. The
Commission also required carriers to provide the required
notifications promptly and without unreasonable delay.
While the Commission specified what type of information must be
shared, it did not specify the method carriers should use, allowing
them to share customer account information pursuant to state-mandated
data exchange requirements, privately negotiated agreements with other
carriers, or voluntarily-established business rules, including the
voluntary, industry-developed standards known as the Customer Account
Record Exchange (CARE) process. This approach should minimize the
potential costs or burdens associated with implementing the
information sharing requirements, particularly for small and rural
The new rules recognize a carrier's right to be compensated for the
services it provides by ensuring that providers of long distance phone
services receive proper notification when customers are placed on
The information sharing standards adopted today apply in situations
involving an IXC and a LEC (or LECs). The Commission also issued a
Further Notice of Proposed Rulemaking (FNPRM) seeking comment on
whether they should be extended to situations in which consumers
change LECs. The FNPRM specifically asked whether the Commission
should require all local service providers to participate in the
exchange of customer account information and if so, what information
local service providers should be required to supply.
The Front Lines is a free publication of The Helein Law Group, LLP,
providing clients and interested parties with valuable information, news,
and updates regarding regulatory and legal developments primarily impacting
companies engaged in the competitive telecommunications industry.
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particular article, general concerns, or wish to seek legal counsel
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