Posted: 02/2000
Desperately Seeking Access Charges Reform
BY KIM SUNDERLAND
Now that January has come and gone, pressure has hit the boiling point regarding an access charge reform proposal, which would reduce interstate access charges by $5.6 billion annually over the next five years and still deliver on universal service.
The Coalition for Affordable Local and Long Distance Service (CALLS), which says its plan would consolidate residential phone bills and reduce long distance rates, wanted its proposal implemented in January. It looks now as if the FCC will act on it either this month or in March.
The coalition includes members from six of the nation's leading ILECs and IXCs. Its plan would apply to carriers on a voluntary basis. The reform would revise the current system of common line charges by combining existing carrier and subscriber charges into one flat-rated subscriber line charge (SLC), and it would provide for limited de-averaging of those charges under specific conditions.
The plan also would establish a portable universal service fund providing explicit support that replaces support currently implicit in interstate access charges.
Finally, it would establish a "social compact" under which traffic-sensitive switched access rates are reduced annually until they reach an agreed-upon level. Once that level is reached, rates for all access elements would be frozen until July 2004.
The plan is signed by AT&T Corp. (www.att.com), Sprint Corp. (www.sprint.com), Bell Atlantic Corp. (www.bell-atl.com), BellSouth Corp. (www.bellsouth.com), GTE Corp. (www.gte.com) and SBC Communica-tions Inc. (www.sbc.com).
"Nobody has put forward another comprehensive universal service and access reform proposal," says John T. Nakahata, the Washington attorney representing CALLS. "There is no back-up plan that will secure universal service as competition and technology continue to emerge.
"We believe that now is the time for the commission to step up and finish universal service reform, along with interstate access charge and price cap reform," says Nakahata, a partner with Harris, Wiltshire & Grannis LLP (www.harriswiltshire.com).
Under court order, the FCC (www.fcc.gov) must review its price cap decision by March 31.
"Four years of debate on universal service and access reform should be more than enough," Nakahata says. "It is time for action."
The CALLS proposal is serious business for the big guys and the smaller competitors as well. Nakahata says that for small to medium-sized IXCs and resellers, the proposal's impact should be favorable.
However, some industry analysts say smaller competitors would have a tough hill to climb under the CALLS proposal. As the plan is implemented, prices over time would move closer to an ILEC's actual cost.
"This is not positive for resellers or smaller competitors because their margins would shrink," says consultant Jeffrey J. Binder, president of Jeffrey Binder & Co., Brookline, Mass. "They would have to come up with non-pricing-related strategies to differentiate themselves from the ILECs, such as better customer care, in order to attract customers."
Such comments now are part of the FCC's record on the CALLS plan and the matter is ripe for FCC action.
State regulators, who have several concerns with the CALLS proposal, have been part of a diverse group working with CALLS to hash out the differences.
For instance, the National Association of Regulatory Utility Commissioners (NARUC) (www.naruc.org), which represents state telecom regulators, is concerned with:
* The plan's impact on jurisdictional responsibility for costs (that is, separations);
* How end-user consumers will benefit from reduced access rates and other changes in rate design;
* Whether the interests of affordability and comparability are sufficiently accommodated;
* The impact of the Internet on the continued ability to recover common line costs on a per-minute basis;
* Assessing market-based and prescriptive approaches; and
* The plan's consistency with the federal Telecom Act.
In comments filed with the FCC late in 1999, NARUC urged that companies paying reduced access rates be encouraged to pass the reductions on to end-user customers.
Despite the controversy, Nakahata remains focused.
"The CALLS plan fundamentally helps bridge the digital divide by improving universal service support and investment in rural areas, and by reforming low-income support in ways that should keep more Americans connected," he says. "No other plan exists out there, and the CALLS plan is the only road out."
