| Reform is desperately needed! Once upon a time, "long distance" was a great luxury, a service very expensive to provide and thus used only by the rich and, as required, big business. So the consumer watchdogs of the day decided that local telephone service, the kind used by ordinary folks, should be subsidized by laying a bit of the cost of local service onto long distance calls. The Supreme Court accepted that logic in Smith vs. Illinois Bell. The year was 1930.
Between 1930 and 1981, the share of local line fixed costs allocated to interstate calls rose. The FCC in that year decided to moves towards a more cost-based rate structure, phased in from 1984 via "access rates". Initially, switched access rates -- fees paid by long distance carriers to local carriers -- were set to suck up about half of the typical retail cost of an interstate call, or about 15 cents/minute. Rural carriers got a LOT more per minute, sometimes over a dollar.
Since the Smith ruling put some of the cost of local service (nowadays set at 25%) into the interstate jurisdiction, the FCC started to align rates with costs (fixed costs with monthly rates, usage-sensitive costs with usage rates) by creating the Subscriber Line Charge, the FCC-jurisdiction fixed portion of your monthly bill. That has risen from $3.50 to over $6 in most cases nowadays. But since 1984, the per-minute switched access rate has fallen; in Bell areas it has been around 0.6 cents per side of the call. This is still way above cost though, and higher than equivalent charges for local calls, or for calls delivered elsewhere in the world (which often don't distinguish).
What the FCC needs to do is get rid of the whole idea of charging for legs of calls based on where the original call began, rather than where it's handed off for delivery. The Internet doesn't distinguish between LD packets and local ones. So the FCC is finally, after many years of hesitation, moving farther in that direction. To make up for the revenue, the ILECs, whose rates are generally covered by price caps (which are way too generous), are being allowed to raise their subscriber line charges, the part of the local rate that the FCC sets.
VoIP providers have been playing arbitrage games on this. With no firm rule in place, they don't pay the access charges that others pay. And the special low rate for ISP-bound calls has been ruled "unjustified" by the Courts. So it's long past time the FCC moved to a simpler unified intercarrier compensation scheme.
For once, Verizon is right on this point. Of course that's mainly because they, having bought MCI, are paying this out, not just collecting it! But it's still right. Basic local service should be competitive. The "terminating monopoly", the price a carrier pays to reach a given number, is not. I get my dial tone from Comcast and RCN, not Verizon, so competition now has some influence on the monthly rate. Arguing for alow SLC and higher per-minute rates is like arguing for a fixed tax on hard disk capacity. A rate per megabyte that seemed fair in 1990 surely would not now.
(But Verizon and AT&T are both wrong, wrong, wrong on wanting a per-number surcharge in place of the percentage-of-revenue universal service tax. Taxing DID numbers is nonsensical; numbers don't create cost. It would just force applications off of the network.) |
nitzanPremium,VIP
join:2008-02-27
kudos:2 | Totally agreed. The current system is outdated and makes zero sense - there is no reason to charge a call based on where it came from - that just complicates things and artificially raises prices for everyone.
As far as per-DID USF charge I agree also- if this passes it will be devastating to many businesses that depend on cheap numbers to survive. Whoever thought about this should promptly resign.
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Nitzan Kon, CEO
Future Nine Corporation |
