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|  Answer Guy
join:2006-07-28
Grass Lake, MI
| Re: FCC will be correcting this abuse of rural telecom subsidy I also know of rule that most people are not aware of in most of these contracts. However, I don't know for sure if it applies to this company or not. When a rural company surpasses a threshold of traffic on a given interconnection agreement, the company can have its contract ended. They will then have to negotiate a new contract with more reasonalbe rates or get an interconnection agreement with a new company. The traffic is measured in years, so it can take some time for the problem to be corrected. | |
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calvoiper
join:2003-03-31
Belvedere Tiburon, CA
| Actually two stories behind this situation There are actually two stories behind this situation.
First, yes, the '82 Divestiture Decree specified sharing of LD revenue with local companies. This was a legacy of the Bell System, which charged more for long distance (and, as well, business lines) in order to make basic residential local service cheaper and to encourage market penetration. This "promotional subsidy" aspect of cheap residential local service continued until it literally became an "entitlement" and was correspondingly formalized at divestiture. (LD revenue sharing agreement between the Bell System and the smaller "independent" companies, including GTE, were then also rolled into this system.) This system was called "access charges" for "access" to the local lines on each end of a LD phone call. It was actually an agreed part of the divestiture decree that originated with the parties--not some cockeyed scheme from Judge Greene.
Second, as a function of the (then) increasing competition for local service, over the last decade or so, the big local companies (as a part of their campaign to weaken the LD companies, which resulted in the LD companies being absorbed by the locals) pushed for, and received, much greater pricing freedom on their access charges.
(The local companies were desperate for this because the justification for access pricing--the true incremental cost of the local part of LD--was becoming so low as to be negligible, both because of technical advances and because of accounting and economic theory changes which allowed fewer "overhead" costs to be stuffed into access charges.)
In any event, the remaining independents benefited from the big local companies' (the Baby Bells') efforts to free access charge pricing and they also got access charge pricing freedom--in part because of economic theory, but in part because the FCC just didn't want to spend the time regulating the obscure charges of comparatively tiny companies. With very little control over the resulting prices, the perfect storm for pricing abuse was present--the person making the choice to use the service (the caller) had no financial stake in what the payer ultimately paid. (Same situation as traditional US health insurance, and we know where that went.)
The result was this Iowa abuse. (Yes, the "access charge system" was abused. In saying so, I fully recognize that it may have deserved to be abused, and the delicious irony of the result.)
What really blew the cork was when the LD campaign succeeded and SWB acquired ATT and VZ acquired MCI. Suddenly, the Baby Bells were paying access charges instead of just collecting them and NOW the FCC thought it was worth their attention.
I think we should take the lesson from this that cross-subsidies, no matter how well intentioned, will virtually always end up biting somebody in the behind. Using LD to subsidize basic local service as a promotional may have been a good idea--in 1927. It should have ended long ago, and the FCC is remiss (and supportive of the vertical re-monopolization of the telecom industry) by not ending it now.
calvoiper
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VoIP--the death knell of remaining voice monopolies! | |
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Stonehawk
Stay Low And Let It Blow
Premium
join:2001-05-17
Deerfield, WI
clubs:
| said by TKJunkMail  :said by Karl Bode :
The irony being, if we're remembering correctly, that these rules were lobbied for by these telecom giants. I think you may remember incorrectly. AT&T didn't lobby for those rules. They were forced down their throat by Judge Greene when Ma Bell was broken up because he didn't want rural carriers to go belly up. The future Baby Bells went along with it because they didn't have a choice. And there weren't telecom giants at that time. There was 1 giant - AT&T. » online.wsj.com/article/SB1191460···imary_hsBut the key was federal rules drafted during the 1983 break-up of Ma Bell, which required big telecom companies to pay hefty fees to small carriers to compensate for the high cost of providing service across miles of sparse farmland. And it looks like the FCC is going to modify these rules because they aren't being used to keep rural phone companies alive, but so that a few individuals can make their profits thru loopholes. » online.wsj.com/article/SB1191460···imary_hsan investigation by the U.S. Federal Communications Commission into the high fees some rural carriers charged to the Bells. Late Tuesday, the FCC proposed rules that, if approved, are likely to prevent such deals in the future. Here is the FCC news release on this: » fjallfoss.fcc.gov/edocs_public/a···75A1.pdfThe Notice of Proposed Rulemaking: » fjallfoss.fcc.gov/edocs_public/a···76A1.pdf I don't usually post on the news items, but this was too much to pass up. I understand the history behind this rule that the local telephone exchanges are using to boost their profits. I also understand that the FCC is looking to modify these rules, so the few rural exchanges using this will be stopped.
My question, is when is the FCC going to modify the rules for the USF, so the few BIG telcos don't profit from it like they are now? Hmmm? How about some equality in the application of the rules for rural and big telcos?
Just a question 
Jerry | |
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AC in CA
@telephony.com
| The original posting was correct. the major carriers pushed for this setup when they thought rural carriers had more outgoing calls (since origination fees are the same) than incoming calls. They thought they would make money.
The irony is that they do make money on even the incoming calls. Most of these calls are business calls from cell and business phones that generate new long distance revenues for the bunches of minutes used. The stories they tell about these being "free" minutes are nonsense. So the carriers win even if they lose here, since the CLEC rates in effect are typically 2.5 cents, while the carriers are earning on average 6.5 cents per minute.
this is actually about killing competition on two fronts--AT&T and Verizon and Sprint all have major investments in conferencing (AT&T just bought an Israeli company for $121 million for example) and they have been working for years (pretty successfully) to kill CLECs. | |
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FCC will be correcting this abuse of rural telecom subsidy