| Intercarrier compensation is a real issue The newsletter talks about the "raid" in the terms of intercarrier compensation; i.e., the termination fees paid to the local carrier on the end that completes the call. Generally what happens is that rural telcos get paid much more per minute to terminate calls in their areas. This is designed to subsidize rural phone service, and does, but of course unavoidably also lines the rural phone companies pockets. (The guy who writes the newsletter is a bit deluded if he thinks that there's a really good way to reform it. Subsidies to rural service will inevitably have an incidence that gives both subsidies to the rural consumers as well as to the rural providers, and there's little he can do about it.)
It appears from his claim that AT&T and Verizon are clamoring for a decrease in the per minute rate that they're required to pay these rural telcos. I'm sure that they view it as a "reform" of the USF-- in fact, it sounds like exactly the sort of thing that the original post is asking for, if you think that the smaller telcos have done "too well really." However, (understandable) skepticism about Verizon and AT&T seems to be clouding one's judgment. I'd like more details, but if they're pushing for more uniform termination fees, then that's exactly the type of intercarrier compensation reform that we should get behind.
For example, AT&T and Verizon are required by regulation to pay these rural telcos a higher fixed termination charge. In Iowa, for example, AT&T and Verizon have to pay up to 13 cents per minute for any call to these locations. Think about what your long distance plan costs, and you can realize that AT&T and Verizon actually lose money on these calls, thanks to regulation. It's still worth it for them to have nationwide long distance, though.
Still, the call volume to these rural areas is limited, so it's generally been acceptable, and AT&T and Verizon have simply passed the costs on to everyone else. However, recently certain rural telcos in Iowa worked out a neat little plan. People in the US who wanted to make an international call would call a number served by the rural telcos. Then, the rural telco would switch the call over a fiber VoIP to the international destination. The wholesale international costs over VoIP would actually be less than the 13 cents/minute termination fee paid to the telco by AT&T or Verizon, and so the telco would actually make a profit on each international call, and the consumer could call for free.
AT&T started suing because their bill for these "free" calls started soaring. »gigaom.com/2007/02/07/atts-free-···million/
However, in the process of trying to shut these down, they made an argument which is incredibly dangerous for VoIP and for consumers. They claimed that the termination fee was not owed because the call was not actually terminated in Iowa. That's a really bad argument for consumers, because it would prevent legitimate VoIP and phone arbitrage. I really don't want AT&T to win on that precedent.
Yet, at the same time, those free calling plans were taking advantage of the regulation in an unintended way. I can't imagine any way to really fix it without reducing the subsidy to rural telcos. I'd much prefer that option to the lawsuits trying to prevent legitimate arbitrage.
So, at first glance, trying to reform intercarrier compensation is not a bad thing to me. It would actually reduce the regulation and corporate welfare of rural telcos, and be a lot better than AT&T's lawsuits. Of course, from one perspective, less corporate welfare payments from the big guys to the rural telcos translates to corporate welfare for AT&T and Verizon. |
