(en)Fcc Access Fee Reform Proceedings

Ewald (ewald@ctaz.com)
Sat, 01 Mar 1997 18:57:32 -0700

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>Date: Tue, 18 Feb 1997 23:32:40 -0500 (EST)
>Errors-To: info-policy-notes-owner@essential.org
>Reply-To: love@tap.org
>Originator: info-policy-notes@essential.org
>Sender: info-policy-notes@essential.org
>From: James Love <love@tap.org>
>To: Multiple recipients of list <info-policy-notes>
>Subject: Fcc Access Fee Reform Proceedings
>X-Listprocessor-Version: 6.0c -- ListProcessor by Anastasios Kotsikonas
>Info-Policy-Notes - A newsletter available from listproc@tap.org
>February 18, 1997
> FCC Policy on Access Charges and the
> Public Switched Telephone Network (PSTN)
> James Love, CPT (love@tap.org, 202.387.8030)
>The FCC has two separate proceedings on the topic of Access Fees
>by local exchange telephone companies (LECs). The first is a
>proceeding on Access Charge Reform that was noticed on December
>24, 1996. The comment period for this docket (CC Docket No. 96-
>262) closed on February 14, 1997. CPT filed comments in both the
>initial and reply rounds. The second proceeding is a "Notice of
>Inquiry" into the status of the "enhanced service provider" (ESP)
>exemption for Internet Service Providers (ISPs). The initial
>comments on this proceeding are due March 24, 1997, and reply
>comments are due April 23, 1997. The FCC set up two email
>addresses to receive informal comments on the proceeding. For
>the access charge docket, the address is access@fcc.gov. For the
>notice of inquiry, the address is isp@fcc.gov. The FCC has a
>very useful Web page on both proceedings at
>http://www.fcc.gov/isp.html. CPT's Web page on Access Charge
>Reform is: http://www.essential.org/cpt/afr/afr.html.
>Ever since the AT&T breakup, the FCC and state regulatory bodies
>have pursued a policy of using hefty per minute charges on long
>distance calls to keep down the monthly fixed cost of having
>telephone service. For the "interstate" market, these are called
>"common carrier line" (CCL) charges, and in recent years, they
>averaged about 5.7 cents per minute for originating and
>terminating long distance calls. These charges are imposed on
>the long distance telephone company by the LEC, and passed on to
>consumers in the form of higher prices for long distance
>services. Internet Service Providers and other data processing
>or value added computer services don't pay network access fees
>because they are considered "end users" by the FCC, and covered
>by the Enhanced Services Provider (ESP) exemption. (See Robert
>Cannon's paper on the ESP exemption at
>For many years, several local service telephone companies have
>tried to get state regulators or the FCC to impose per minute
>usage fees on modem users. When Netscape and other software
>companies announced software for Internet telephony, an
>association representing small independent distance telephone
>companies asked the FCC to ban the Internet telephony software or
>regulate its use. The large long distance companies and many
>(not all) of the LECs told the FCC that the ESP exemption should
>be eliminated for ISPs. CPT and others objected. The CCL
>charges are so high they would create havoc in the dial-in market
>for Internet Access. If ISPs were required to pay the CCL
>charges for originating an Internet connection, the charge would
>be $1.67 per hour. This would eliminate all flat rate dial-in
>subscription plans.
>Beginning in 1995, CPT told the FCC in several pleadings that the
>CCL should also be eliminated or reformed for ordinary long
>distance voice traffic. The CCL is highly inefficient. By
>using hefty per-minute charges to support the non-traffic
>sensitive (NTS) costs of local telephone service, long distance
>companies and others cannot offer innovative services or billing
>options. CPT was willing to trade increases in the fixed monthly
>costs of local telephone service for the elimination of the CCL,
>or to see it reformed in some way that was not so inflexibly
>linked to per minute usage charges. The CPT position on this
>issue was controversial among some consumer groups. Gene
>Kimmelman from Consumers Union initially argued that the usage
>based CCL was essential to keep the fixed costs of local
>telephone service low. Kimmelman asserted that the CCL provided
>a mechanism for cross subsidies between rich and poor consumers.
>Long distance service was discretionary, the argument ran, but
>having a telephone in the home was an essential service, and
>prices should be as low as possible. CPT countered that income
>was not the only factor that determined long distance usage --
>family size and proximity being the main non-income factors. In
>the universal service docket, CPT presented data showing that as
>a percent of the monthly bill, differences in consumption of toll
>and discretionary services were not very different between rich
>and poor consumers, and that black consumers consumed more toll
>and discretionary services than do whites.
> Table 1
> How do Phone Bills Differ by Income?
> Average Percent of
>Income Monthly Toll & Average
>Quintile Bill* Discretionary* Monthly Bill
>Poorest 43.70 25.00 57%
>2nd 48.40 29.70 61%
>3rd 53.40 34.70 64%
>4th 57.10 38.40 67%
>Richest 70.70 52.00 74%
>White & Other 54.40 35.80 66%
>Black 64.00 45.30 71%
>* For 1992.
>Source: SRCI
>(From http://www.essential.org/cpt/telecom/us.html)
>CPT argued the elimination of the CCL will lead to much lower
>long distance rates. Moreover, CPT argued that it was
>increasingly necessary to phase out the CCL as we use the "public
>switched telephone network" PSTN for new services, such as
>residential connections to the Internet, for which the per-minute
>CCL charges were a poor proxy for affordability.
>There are also many other issues that are connected to the access
>charge and ESP proceedings. The FCC and local regulators are
>writing rules that allow firms to lease LEC facilities in order
>to compete for local telephone service, and the entire system of
>funding universal service is also being rewritten. In each of
>these areas regulators must decide if per-minute or other usage
>based charges are the appropriate basis of fees for use of the
>To appreciate the complexity, it is important to understand that
>most of the cost of local telephone service is for the fixed
>costs of the so-called local loop from the home to the LEC
>"central office." "Traffic sensitive" costs exist, but they
>aren't as high as one might think. Before Internet traffic
>became important, the "average cost" of using a switch was about
>.17 cents per minute, or about 10.2 cents per hour, for some
>LECs, or about 6 percent of the CCL charge for originating a
>call. Internet usage has increased the total demand for network
>usage, but it has also changed the patterns of demand. Where
>voice peaks are typically around 4 pm, the Internet peak usage is
>often well after 9 PM -- when voice usage is very limited. The
>daily "load" on the switch is greater, but this is good news,
>because longer daily loads result in lower average costs per
>minute. Moreover, LECs can now deploy technology being marketed
>by Nortel, Lucent and others, which can completely bypass the
>LEC's circuit switches and trunks, and transport data from the
>local loop directly to the ISP in a packet switched network.
>This radically changes methods of cost allocation in networks
>because an open data connection doesn't consume bandwidth in the
>absence of file transfers. (Just staring at the screen doesn't
>consume bandwidth in a packet switched network).
>CPT wants the FCC and other regulators to facilitate the
>migration to affordable full time data (24x7) connections to the
>Internet. We believe the most practical path today is to use the
>copper wire local loop, first for ISDN, and later for various
>xDSL technologies that provide greater bandwidth. CPT has tried
>to get regulators interested in ISDN pricing, because this is the
>only digital technology that can be deployed in the mass market
>right now.
>The FCC has to decide how to charge consumers for higher
>bandwidth connections. Some LECs, such as SBC, now double the
>subscriber line charge for ISDN BRI service. If the FCC
>eliminates the CCL charges, it must replace at least some of the
>lost revenue to the LECs. There are many competing proposals --
>such as higher fixed monthly charges for the consumer, or new
>charges for long distance companies, based upon a flat rate for
>each "line," or something based upon value added or gross
>revenues. AT&T and some other companies want the FCC to impose a
>new charge on the use of residential second lines. There are
>also issues relating to life-line subsidies for the poor, or the
>degree to which businesses and residences make different
>contributions to the "joint costs" of the network.
>The ESP/ISP inquiry is also complex. Do dial-in Internet users
>impose excessive costs on the network, or does the new Internet
>traffic actually lower average costs for everyone? CPT, BBN's
>Fred Goldstein, the Information Technology Industry Council and
>others have provided the FCC with evidence that dial-in users are
>not using the network in ways that exceed peak capacity
>requirements for voice users, that LECs are making substantial
>profits from deployment of second lines, that LECs have off the
>shelf methods of dealing with congestion at the terminating ISP
>end, and that LECs benefit from certain economies in delivering
>derived channels to ISPs.
>If ISPs are required to pay for incoming calls, should consumers
>pay less for making local calls? Should regulators eliminate
>usage fees on ISDN calls made to ISPs if the ISPs are paying for
>incoming calls? How would ISPs be charged for incoming calls?
>On the basis of minutes per connection? Are off-peak usage fees
>economically inefficient? What does it cost to meter usage?
>Should fees be based upon a percent of revenues per subscriber?
>Should regulators distinguish between value added and basic
>services? Should ISPs be charged separately for Internet
>telephony? Who would monitor such usage? Would ending the ESP
>exemption have a significant revenue impact on the LECs? What
>would it do to the development of the Internet? Isn't the subtle
>and complex nature of data usage such that it is entirely
>inappropriate to fund the fixed costs of the local loop through
>usage based charges?
>There are also a number of issues relating to LEC strategic
>behavior. If usage fees become a profit center, will the LECs
>have an incentive to deploy technology that bypasses traffic
>sensitive resources (circuit based trunks and switches)? Will
>excessive access fees permit the LECs to eliminate independent
>ISPs through predatory pricing?
>Many of the LECs and the long distance companies are pushing for
>per-minute fees on ISPs. PacBell and Bell Atlantic/Nynex are
>among the most aggressive LECs seeking per minute fees on ISPs.
>There are also some disagreements among LECs. For example,
>BellSouth told the FCC that with the current CCL charges, it
>would be a mistake to eliminate the ESP for the ISPs, and
>BellSouth has also not adopted the "the sky is falling" position
>being advanced by PacBell and Bell Atlantic/Nynex.
>The ISPs themselves are just getting organized politically. The
>main ISP trade association, CIX, is badly co-opted on this issue
>by the large telcos who have joined CIX. In the absence of an
>effective ISP voice, a number of computer, software and consumer
>electronics companies have created the Internet Access Coalition
>(http://www.internetaccess.org), which has developed rapidly into
>an effective advocacy effort. This is the group that sponsored
>the excellent study by Lee L. Selwyn and Joseph W. Laszlo, "The
>Effect Of Internet Use On The Nation's Telephone Network," which
>is available on the Internet at
>The enormous expression of interest by individuals who sent email
>for the February 14, 1997 deadline in the Access Charge docket
>(access@fcc.gov) was an important step in impressing the FCC
>staff and commission members about the views of the Internet
>It will also be important to comment on the Notice of Inquiry
>that will examine the IPS's ESP exemption. Email for this round
>can be sent to isp@fcc.gov. It will also be helpful to file
>formal written comments. The first round of comments are due by
>March 24, 1997. It will be particularly helpful to have in the
>record information on topics such as:
>1. How the Internet is used for civic discourse,
> to exercise free speech, and to promote education.
> (One might make comparisons to television).
>2. How the Internet promotes economic development in the
> United States.
>3. How flat rate local calling has contributed to the
> high level of residential penetration of Internet
> services in the United States.
>4. What types of information should the FCC obtain from the
> LECs about network usage and costs.
>5. What information the FCC should gather from the LECs
> and network vendors regarding deployment of higher bandwidth
> technologies, or the introduction of network solutions for
> 24x7 residential digital data connections to the Internet.
>6. Are the LECs engaging in anticompetitive practices with
> respect to independent ISPs and other enhanced service
> providers?
>CPT will provide additional reports on this important issue.
> James Love
> Consumer Project on Technology
> love@tap.org; 202.387.8030
> http://www.essential.org/cpt
>INFORMATIONPOLICY NOTES is a free Internet newsletter sponsored by the
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