FCC To Probe Impact of Flat-Fee Charges forLow-Volume Long Distance Users

Posted: 09/1999

Regulatory News

FCC To Probe Impact of Flat-Fee Charges for
Low-Volume Long Distance Users

By Kim Sunderland

In two relevant moves, the Federal Communications Commission (FCC) has opened a notice
of inquiry (NOI) on the impact of flat-fee charges on low-volume users of interstate long
distance service,

In its NOI in Common Carrier Docket No. 99-249, the FCC seeks comment on whether there
are alternatives to flat charges. Specifically, the NOI inquires into the effect of
certain flat charges on consumers who make few, or no, interstate long distance calls. The
inquiry addresses a variety of flat-rated charges that appear on consumers’ bills, such as
charges to recover the presubscribed interexchange carrier charges (PICCs) that the long
distance carriers pay some local phone companies, long distance carriers’ monthly
minimum-usage charges, and charges to recover universal service fund contributions. FCC
Chairman William E. Kennard says the federal agency is redoubling its commitment to
ensuring that all consumers–including low-volume users of long distance service–reap
benefits from the highly competitive long distance market.

While many residential and business consumers have enjoyed overall reductions in their
long distance rates, according to FCC attorney Neil Fried, some long distance customers
now pay flat charges to their long distance carriers. In addition to determining the
effect of such charges on low-volume users, the NOI also seeks industry and consumer group
comments on a number of pricing options. Fried says these options may have the effect of
"ameliorating the impact of such flat-rated charges on low-volume, long distance

"The commission fully recognizes, however, the competitive nature of the long
distance market in this country and has no intention of imposing any unnecessary
regulations on it," he says.

The NOI was adopted by a 4-1 vote in July with Commissioner Harold Furchtgott-Roth
dissenting. The commission invites comment on, among other things:

  • Whether such charges have resulted from a competitive market;
  • Whether the FCC should rely on competition, such as the availability of dial-around
    services or the entry of Bell operating companies (BOCs) into long distance service, to
    address the needs of low-volume customers;
  • Whether the impact of these flat charges warrants regulatory action;
  • Whether the FCC can take steps that aren’t considered direct regulation of long distance
    companies, but that would give the commission more control over the way long distance
    companies pass access charges and universal service assessments onto consumers;
  • Whether a correlation exists between income and long distance telephone usage; and
  • Whether the FCC should require long distance carriers: to maintain rate plans that don’t
    include a minimum monthly charge; to pass through a portion of interstate, switched access
    charge reductions to a basic rate plan; or to pass through a PICC calculated as a
    percentage of the bill, capped at a certain dollar level.

Comments are due in this inquiry Sept. 20, with reply comments due Oct. 20.

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