article

Requisite Codes Cost Resellers Big Bucks

Posted: 11/1999

Regulatory News

Requisite Codes Cost Resellers Big Bucks
By Kim Sunderland

Mandatory carrier identification codes (CICs) pose a serious burden for
small-to-medium-sized carriers, according to the nation’s resale lobbyist. CICs are the
numeric codes that allow local exchange carriers (LECs) to identify the interstate
interexchange carrier (IXC) that an originating caller wants to use to transmit its
interstate call. In simpler terms, LECs use the CICs to route traffic to the proper IXC
and to bill for the interstate access service being provided.

The Telecommunications Resellers Association (TRA) says that all IXCs, namely
switchless resellers, shouldn’t be required to have CICs because it "would increase
their operating costs significantly and erect a huge barrier to entry for
small-to-mid-sized companies," according to David Gusky, TRA’s executive vice
president.

The Federal Communications Commission (FCC) in 1997 required CICs as a potential
solution to slamming. While the CIC issue hasn’t been a high priority at the FCC this
year, the commission is "considering our options," says Kurt Schroeder, deputy
chief of the FCC’s network services division, which is handling CICs. "But I can’t
say when we will act on any outstanding issues." These include requiring carriers
that hold more than a certain number of CICs to return them so that other carriers can use
them. The argument has been, Schroeder says, that it’s unfair for one carrier to hold too
many CICs when their customers have other uses for them, such as routing and billing.

There’s also the issue of cost. Implementing mandatory CIC requirements are accompanied
by a multitude of expenses and procedures that would place a serious hardship on scores of
switchless resellers, says Steve Trotman, TRA’s vice president of industry relations. When
the FCC released its original CIC order, he explains, it did so thinking that CICs would
curb slamming, which was mostly being perpetuated by resellers. "But it won’t fix the
problem and the majority of slamming hasn’t been done by resellers," Trotman says.
"We’re afraid the FCC will mandate that all switchless resellers must get CICs to
stay in business, which is extraordinarily expensive for those least able to pay for
it."

Tandem trunk activation fees, for example, which are the CIC activation costs through a
LEC’s trunk group, can range from $400 to $2,000, according to TRA. To have full access to
a carrier’s network, a reseller would need to match the carrier’s point of presence (POP)
wherever the carrier has coverage, which could cost a reseller $400,000 to $600,000 in
tandem activation fees.

To get tandem access, a reseller must submit an Access Service Request (ASR) to each
LEC to order the trunk group required to activate a CIC. "ASRs are arcane and obscure
and require specialized expertise to complete properly, which is not easy to find or
hire," Gusky told the FCC. Because of this, most resellers hire a consultant or
engineering firm to handle the job, costing about $250 to $1,000 per completed ASR. This
calculates to a cost of $300,000 to $400,000 to complete and submit ASRs on a nationwide
basis (see table below).

Implementing a Nationwide CIC
The total cost of implementing a CIC depends on the underlying carrier with which a
reseller is doing business. TRA estimates that implementing a CIC for MCI WorldCom Inc.,
Sprint Corp. or Frontier Corp. would cost:

  Low High
Tandem Activation Fees $400,000 $600,000
Issue ASRs $300,000 $400,000
Regulatory Filings $50,000 $100,000
Facilities-Based Toll Tariffs/Prices $30,000 $50,000
Overall Project Coordination $5,000 $10,000
Total CIC Implementation Costs $785,000 $1.16 million

Source: Telecommunications Resellers
Association (TRA), Washington

Regulatory fees also are incurred when converting from a pure reseller to a
facilities-based carrier. Many states require different certifications for
facilities-based carriers as opposed to a reseller, which means various state filings are
needed. There’s also tariff costs because when a carrier orders a CIC to become
facilities-based, it also introduces a new set of pricing to reflect its ability to
purchase less expensive wholesale toll service, TRA says.

If the costs of implementing a CIC are not bad enough, Gusky says, there are additional
considerations, including:

* Resellers with a CIC that matches a particular carrier’s network will find it costly
to shift to another underlying carrier. Since carriers have different networks that don’t
use the same POPs in every city, the estimated cost of changing to a new carrier may be as
high as one-third the cost of the initial tandem activation fees and ASRs.

* Many resellers have business relations with more than one carrier, which means higher
CIC expenses.

* CIC implementation costs are not entirely nonrecurring. Every time a reseller’s
underlying carrier adds or moves a toll POP, the reseller also must change its trunking
configuration to match.

CICs enable callers to use the services of telecom service providers either by
presubscription or by dialing a carrier access code (CAC). Originally, CICs were
three-digit codes (XXX) and CACs were five-digit codes incorporating the CIC (10XXX). In
April 1997, the FCC approved an industry plan to expand CICs from three to four digits on
the grounds that it was a reasonable method of meeting future demand for CICs as the
supply of three-digit codes was exhausted.

There are benefits to a reseller that has its own CIC, Trotman says, "but that
should be approached voluntarily by switchless resellers who might want to extend into
casual dial-around calling. Then they would need their own CIC."

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