Debate on Access Charges Heads Back to FCC

Posted: 07/1999

Regulatory News

Debate on Access Charges Heads Back to FCC
By Kim Sunderland

Just as several interexchange carriers (IXCs) and incumbent local exchange carriers
(ILECs) attempt to help the Federal Communications Commission (FCC) revise its access
charge rules, the U.S. Court of Appeals for the District of Columbia has struck them down.
The FCC, according to the court, has failed to explain adequately its formula for
determining how much long distance carriers must pay the ILECs for completing their calls.

Throughout the spring, some half-dozen IXCs and ILECs have been meeting at the request
of FCC Chairman William E. Kennard to work out an access charge compromise. Although
beaten to the punch, they aren’t down for the count yet. The IXCs and ILECs will continue
negotiating a compromise plan even though they’re on opposite sides of the ring.

In 1997, the FCC decided that the annual fees paid mainly to the ILECs and Irving,
Texas-based GTE Corp. by long distance companies should decline by 6.5 percent a year.
This rate has come to be known as the FCC’s price cap productivity factor, or
"X-factor," a complex formula that tries to ensure that as ILECs’ productivity
improves, they would receive less in access charges. These fees have been decreasing and
currently make up about 30 cents of every dollar of long distance charges.

The FCC’s 1997 adjustment caused access charges to be reduced by $1.7 billion to better
reflect the ILECs’ costs to connect long distance calls. These fee reductions were slated
to take effect July 1. The court’s three-judge panel, however, unanimously decided in United
States Telephone Association v. FCC
(no. 97-1469 and consolidated cases) to reverse
this rate decision, also saying it might be willing to temporarily set aside its ruling
while the FCC reconsiders how it came up with the rate.

Judge Stephen F. Williams, who was joined by Chief Judge Harry T. Edwards and Judge A.
Raymond Randolph, wrote the unanimous opinion for the court. The FCC, meanwhile, plans to
ask the court to stay its ruling.

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